At the Character Select screen, highlight Morrigan. 
Then press Up, Right, Right, Down, Down, Down, Down, 
Left, Left, Up, Up, Up, Up, Right, Right, Left, Left, 
Down, Down, Right, Right, Down, Down, Left, Left, Up, 
Up, Right, Right, Up, Up, Left, Left, Down, Down, Down, 
Down, Down. If done correctly, Shadow Lady will appear 
by Morrigan.