I don't know if these really are the stones to which the story relates, but this site could certainly fit and is near Killala Bay. He's not exactly the flamboyant storyteller and seems to have forgotten some fairly important details. But never mind.
Some few years ago, when staying in Co. Sligo, I met with rather an interesting legend [to do with stone circles] which is only very locally known. The stones are called "Mc.Dowd and his children." This Mc.Dowd, it appears, was a fisherman, and when pursuing his occupation in Killala Bay, was in the habit of meeting with a mermaid. These meetings ended in their betrothment and in his finally taking here home; but on their way he perceived that she carried a wand which he felt some suspicion about, and after considering the matter over, he quietly arose during the night and hid it. When in the morning Mrs Mc.Dowd discovered her loss, she became almost disconsolate. Years passed over, the wand was at last found, and, returning into the house, she touched with it each of her children and Mr. Mc.Dowd, and they were at once turned into stone, and then she fled back to her old sea life in Killala Bay, which is close to where these stones may be seen.
From 'Pre-historic remains in the Lake District, a paper' by W. Kinsey Dover (1880).