Assuming the water region doesn't need to be an underwater city.
All buildings etc would be post-apocalyptic in nature, constructed out of unusual materials, etc. No perfect modern day house boats, ships or subs allowed.
* A central floating Fort that would be a commerce center, with shopping areas for rent to people to sell stuff, this area would be no damage.
* All area besides the central fort would have damage enabled.
* I would like to disable flying, but am not set on it. I could be easily dissuaded from it.
* Houses would be "make shift" house boats. or floating houses etc. I think there would be a 'village' area with house boats connected by walk ways.
* Would really like some water transportation like sail boats, run down or jery-rigged jet skis. That sort of thing.
* It would be really cool if there could be a script to make things rock a little, just to give a feeling of the sea. But that may get too annoying too quick. And I don't wanna throw up on my keyboard.
Any ideas, comments etc. please share.