Just make a terrain that looks like the falls area without water and save it. Re-import same terrain into terrain editor and rework it over the area where the water is channeled and falls. Use the tools to pull up that section and smooth and groove to look like water. Bring the second water terrain into renderer and add water texture. Bring in first terrain and lay it over the water terrain (most features should line up) You are trying to push up just the water that shows as falls and conceal all water of terrain beneath. Just a slight explanation, not a full tutorial. ;)