There are a number of water mods in existence, though my personal choice is generally http://tesnexus.com/downloads/file.php?id=8011, rather than trying to tell you why I like it, I'll just let you look at the screenshots, and decide if it's what you want yourself. Some of the screenshots also show comparisons to other water mods, which might help you decide if this one is for you or if you'd rather try a different one.
I too am interested in this, specifically a cure for Oblivion's rather crude distant water reflections. An oldish mod exists that tackles this, Water_Reflection_Blur, but as the author states it is a beta release and has issues. Are there more modern (and trouble-free) alternatives?
I know of no other mod that does the same thing as that one, and unfortunately, while the mod works well to remove the jagginess on the distant reflections, the blur effect applies to the nearby ones too, which I don't really like, so I don't use it, myself.
In any case, that mod just replaces the water reflection shader with one that blurs the edges of reflections, it isn't really a substitute for mods that change the values for water in the Construction Set and as far as I know, should work with them.