Quote - "1.The manual says about cloud altitude: "altitude is pretty straightforward. The slider covers usual altitudes, but any value can be indicated"
It doesnt specify it is relative to sea water, and it  isnt correct as you can not  specify negative numbers. "

Exactly, it doesn't specify. Which means it can be relative to anything and it's always correct. :-)
You probably assumed it's relative to zero in z axis, but it's your assumption. :-)

Quote - "2.From wabe's posts I figure there might be a way to define sea level in preferences in Vue infinite?"

If there's one, I don't know it or don't remember it.

Quote - "Having to do it by adding a sea plane (when I dont need one in the scene) and having to change the location of the sea and hiding it, is a flawed way of setting it up.(actually removing it instead of hiding seems to work too, it rememembers the new sea level)."

What's the difference in adding a sea plane or changing a value in the options menu? It takes less clicks to do the first, so that's good! I don't see any flaw in making our life easier. :-)

Anyway, you only need it if you want a special effect like the one described (really low clouds). So, most of the times you don't need to worry about it.

Quote - "If everything is defined relative to sea level, how come moving the sea up or down doesnt affect the ground position? I had my ground at -300 and sea at 0. Then I moved the sea to -100. The ground stayed in its place although now it is -200 below sea level. Is that not a flaw?"

Huh?!... I don't understand your point. I was talking about atmospheric settings (read my post). The ground is no atmospheric setting. Anyway, what logic would it have that the ground moves when the sea moves?! That has no parallel in the real world whatsoever.
So, no, that's no flaw (it would be a flaw if the ground would move!).