I think the view distance underwater in Oblivion was probably a bit unrealistic. Although it would depend on what the water you were in was like.
I forget what the case is for fresh water systems, but in the ocean murky water tends to be a sign that the area is teaming with life and lots of plankton. The clearer the water gets, the less life there is to be found. Areas with warmer water tend to have less life, and areas with colder water generally tend to have more. (Ex. Compare the Monterary Bay in CA to, say, a beach off the Bahamas. The former being in a spot of cold upwelling, and the latter being in a spot where the water is warmer.) At least, that's all I remember from my Oceanography class.
I think it would be really interesting if Bethesda took the time to match the water clarity with the amount of life living in it, and so on and so forth. Seems silly, but that level of detail takes dedication.
Frankly though, so long as the waters have SOMETHING in them I'll be fine. I won't pretend I liked being attacked by Slaughterfish every ten seconds in Morrowind, but it was preferable to having vast rivers full of absolutely nothing but rocks and more rocks in Oblivion.