Pfft, people think this toy is real? That's rich. Look, everyone, as an MLP collector (of every generation), I can indeed confirm that this is fake. I go to stores (Wal-Mart, Target, Toys R Us, etc.) all the time looking for ponies, and I have never seen this so called "Princess Twila" toy. And, it really doesn't take much to see that this is fake.
For starters, read the bottom of the image. It states "argument and PHOTOSHOP montage art by Invisibleguy Ponyman". That right there should make it obvious that it's fake. Furthermore, a simple search of "Princess Twilia" on Google results in an ask blog on Tumblr, and speculation of this very image. If this were real, we'd be seeing results from MLP sites about the toy, where you can buy it and so on. Another thing that confirms this image as fake is this page right here:
http://www.strawberryreef.com/Index/BodyType/fim_sosoft.html
This is a My Little Pony collector fansite called Strawberry Reef. As you can see, they keep track of every MLP toy. Do you see "Princess Twila" anywhere on the page? No.
Also, I have an account over on the MLP collectors forum, MLP Arena. I just searched "Princess Twila" and got no results. Now you're probably thinking "doesn't that just mean no one there knows about the toy". Yeeeaaahhhh, no. MLP Arena has a lot of members, and believe me, if this toy was real, there'd be at least one person who would have posted about it. Every time a new toy is revealed or is seen on TaoBao (a Chinese auction site where MLP prototypes often show up), a thread is made about said toy. And there is no thread about this so-called "Princess Twila", not even a mention of her in any post, and as I said, there are a lot of members there.
This is fake, people. I'm baffled at the fact that this thread is still going on (six pages, seriously?) when it's not very hard to find out that this is fake. Why are people still discussing this?
EDIT:
@Perfect Bio
The Princess Skyla toy is real. I've seen her in stores. However, she is not the daughter of Cadance and Shining Armor.