To make the water smoothly flow up and down, you should use a sinewave. The "sin" and "cos" functions are not only useful for triginometry, they have a very nice wave graph. You should probably do something like this:
Global wavecount ;... While KeyHit(1)=0 ;... wavecount = wavecount + 5 ;change the 5 to whatever speed you want the water to wave PositionEntity water, 0, Sin(wavecount) * .5, 0 ;Change the .5 to the height of the waves ;... UpdateWorld RenderWorld ;... Wend