An abstract 'it'. It is actually built into fasai. All that has happened is that the hi has been dropped. This often happens in common expressions such as this where the subject is an abstract one.
(If you come across more formal registers of Welsh, it is even more common for the pronoun to be dropped unless it is absolutely necessary to understanding.)
Fasai'n well? is literally "Would it be better?", but once you use it with gyda ti (with you), it changes the meaning to "prefer": Fasai'n well gyda ti aros? (Would it be better with you to wait? i.e. Would you prefer to wait?).
If there's no preferring involved, you could say Fasai'n well i ti aros? (Would it be better that you wait? i.e. Would it be better for you to wait?) which is probably closer to your translation.