What I would do with this: turn the water into a slab, not a plane. Then, create a terrain that goes into the deep, so you see the bottom. Of course, you'll possibly need two terrains, one for the island and the other for the bottom, and then you can have two different textures without resorting to ... Or, come to better think about it, the tutorial on transparency blending of terrains (that AgentSmith posted the link to recently) would come great here.

-- erlik