Bahh. I was actually just playing around with a moving platform making it look like a boat.
In this genre of games, I typically have seen water handled in one of two ways. One is that it acts like any other block. For example, if you were to dig a "tunnel" through the water, the blocks would stay in place.
The only other method I can think of is a game like Block Fortress for IOS. If you "break" the last block holding the water back then all the water "fills" in - a static sea level.
Anyway, way over my pay grade. Glad to see your interest is piqued though!