How add water?

#1 Hit f11 to go to the editor, select the creator, and under sim groups or mission objects (something like that) there is a water block object

#2 More precisely it's F11 (World Editor), F4 (World Editor Creator - also found under the Window heading). From there it's Mission Objects -> Environment -> Water. That will pop up a panel asking for a name and it also contains some other settings. The name is optional, don't worry with the settings yet, but make sure that the Surface Texture and Env Map Texture point to a correct location. When you click ok you can then switch to the World Editor Inspector and play with all of the different settings available there.