At this point, I'm not too worried about issue of "clashing" reflections. First, I want to find out if a transparent water surface is possible. Then, we'll figure out things from there.
I did have the alpha texture idea, so I will try that later tonight when I get home. The water textures are located in the 'data\Misc' folder, so it's just a matter of editing all of them. But I doubt that will work, though. There was a thread in which Flakwalker tried to make alpha channels on a flag, but it did not work.
However Sansal did post this picture:
I know that it is possible.... Maybe Sansal or another 3D modeller could help???