> For more politically correct, I'd just say 怪物 or 未知生物.
怪物 is an alternative. However, it is usually back translated as "monster," which seems to be even more politically incorrect than 妖怪. Plus, you want to convey the mythical connotation of the word. Hence I think 妖怪 is slightly more suitable for that purpose.
未知生物 (unidentified creature) is also an alternative, if people don't mind that it sounds too scientific.
怪物 is an alternative. However, it is usually back translated as "monster," which seems to be even more politically incorrect than 妖怪. Plus, you want to convey the mythical connotation of the word. Hence I think 妖怪 is slightly more suitable for that purpose.
未知生物 (unidentified creature) is also an alternative, if people don't mind that it sounds too scientific.