I remember having a lot of fun with the capx shinkan made way back then. I tried to make the waves look a little rounder, and I wanted to make splashes too, so I ended up adapting some formulas I found somewhere. It worked well on my desktop, but I was disappointed with the performance on my iPhone... I meant to post a link back on the original thread but never did.
To have things float in the water, I have a row of invisible sprites with the solid behavior - they get updated to the water's surface (minus an offset to make things look partially submerged).
Press space bar to make waves, or click the mouse to make a splash. The beach ball has the platform behavior so you can move it around with the arrow keys. (Flushing drains the water, then it fills up again)
try it out here: http://www.rieperts.com/games/Water
you can get the capx here: http://www.rieperts.com/games/forum/water.capx