Quick question: do the Displaced need to come from Earth? Do they have to be original characters? Or could I take, say, literally Ask Ketchum from the Pokémon world and displace him?

As I understand it, Displaced is a normal person geting transformed and sent to Equestria. Your example of a preexisting character from another franchise would just be a regular crossover.

7903325
I think what Show meant, is a existing character Displaced as another.

7903331 Ah. Well, that could be an interesting twist.

I mean, I don't see why not. At it's core, a Displaced is -typically- where your MC, while in costume, gets transported into Equestria while simultaneously transformed INTO their costume. So if you can justify Ash/Cloud Strife/Link/Etc. being costumed as someone else, then I don't see why you can't displace them.

(I mean, I know the Waifu Catalog has an option to use a fictional character instead of an SI, and I once whipped up a guide for how to use a fictional character as the MC for a Jumpchain. *shrug*)

EDIT: And now I'm imagining an Ash who was a fan of the PokeEarth version of LoZ (Hyrule with Pokemon) attending a con as Pokemon Trainer Link.

7903317
There was a Twilight displaced into the mass effect universe if that's what you mean

It's called a multiverse you can take your fursona dressed as a different character and displace them from toilet-con on planet Washingbucket.

7903317
Usually as it happens is it’s a guy from Earth who’s tricked by the Merchant and they’re in costume from either a con or sometimes Halloween.
NOW.... I haven’t been in the game for some years, so it may have changed, but that’s what I remember

7903464
Not all Displaced has to involve wearing a costume / going to a comic con, it could have been a Void Dweller wanting to mess with things. or some other cosmic/magically/weird stuff. Be creative to the approach of how someone gets displaced/changed/etc.

In theory you could take any character from any franchise and plop them in any other world by the standard isekai methods and by definition they are 'displaced'. But if you go by the stuff from here, it's a dude or gal going to a convention and getting sent to some variation of the MLP world as a fictional character by interacting with 'The Merchant' in some way.