I once experimented with 128x128 mesh terrains, and found it much faster to split it up into 16x16 or 32x32 blocks. Even though old cards can handle 32 thousand triangles, it's better to split them up this way so blitz will automatically cull out each block when not visible (assuming each terrain "block" is seperated into it's own entity), which should increase frame rates considerably. It would even be possible to do block based mesh lod with occlusion for terrain blocks hidden behind mountains, although this wouldn't be much help for a water system.