Alright, Theory Time:
Blaze is capable of generating fire underwater. Not only that, she’s capable of breathing underwater for 50% longer than Sonic can. Strangely enough, she’s a cat whose fine in water but afraid of heights.
I think Blaze probably generates fire in a manner similar to Thermite igniting. Thermite, because it has its own oxygen source, can still burn underwater. Blaze probably takes in massive amounts of oxygen into her body to produce and fuel flames, as well as allowing her to hold her breath longer.
Since there’s less oxygen at high elevations, she probably hates heights for that reason: She’s in danger of suffocating if she goes too high.