1) You didn't compile your map. "Compile" basially means to turn all polys solid. You saved your map, but you didn't "compile" it, thus it's not compiled. (>_>)
>Press F9 and save, or...
>Go to File and select "Compile to PMS"
2) Make water? Use the scenery "blank.bmp" and color it Deep-Sky Blue, Robin Egg Blue, whatever floats your Titanic. Oh, and make sure you set the transparency way below 100%.