I'm not an expert on copyright stuff by any stretch of the imagination, but I feel like outright using Shrek's name coupled with his likeness--and then charging money for it--is probably something of a no-no if the appropriate owners of the IP caught wind of it.
If you look around and look at other commercial parody games, you don't outright see them using the name of the thing they're parodying, right? They usually make some attempt to obfuscate or cheekily alter the name just enough, while making alterations to the designs, too.