Well, there will be times when you want the transparency, too. Bill is right in what he says, and that's the way to go, to make transparent things less so. But you can easily get rid of the square edges around your terrain, by moving the "clip" slider to the right in the terrain editor. Do that and you'll see your edges disappear. But when you clip a terrain, it causes it to float in the air, and higher if you make it taller, so you'll have to hit the "drop" button to make it ffall back into the water, or just drag it down in a viewport window. If you do that, you can have your water as clear as you'd like, and also the square edges will be gone. Equally, aside from using "clip", you could also just paint the edges away.