The default land height should be set to 11000. The default water height should be set to 10500. That should fix the water issues.
I also keep the 'LOD' water check box off until I am done with the worldspace editing.
Still doesn't work
It's like the water takes priory over the land in which should be render first. If you move the camera down and look sideways, you can catch a glimpse of the land by looking off into the distance though. That's in geck, if I open it in Fallout 3, it's fine.