well, i can't help with the squares but i can give you some pointers on making the water look more realistic.

first and foremost do not use transparency. Refraction will take care of showing what is underwater.

second turn off "cast shadows" on your water plain. this wil insure that the things underwater will be lit.

see attached image

oh, and one other thing. she is crotch deep in water, if she were waist deep, the water would be around her naval.

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