this is a bad idea.
such a large body of water is only going to cause a problem.
perhaps the floating rubbish could be big enough to create a "path" from one ship to the other, use an animated water texture but keep it opaque (or pretty much un-see-through-able =P). this way the water doesn't have to be deep.
the "rubbish" could in fact be blocks of ice, and then you place a trigger_hurt just above the 'water' so ppl don't wanna go in there (instant death plz)
large areas of water will be laggy and well, not good
to make it blend to the sky, simply use strips of the water texture but make them more illusionary as they get further out, eventually they will blend into the sky.
but let's be honest, you're not going to finish this map, and if you do it's gonna be crap?
prove me wrong please