Farcry and Morrowind (and PotC and DF:Black Hawk Down) certainly have water that looks very nice, and look very realistic, however they're not so great when you're in. They could improve that by simply having better effects but even if it looked right, it wouldn't be at all realistic physically. Ripples and waves shouldn't be artwork drawn on the surface, although sometimes this looks excellent (check out Farcry's shores - no nasty line where the water ends, but nice rippling wavelets) and water should move if there is anywhere gravity would pull it into. Likewise with gas - things like clouds in flight sims forming and floating realistically and murky dungeons having mist floating around (which I think would look unbelievably cool - think dry ice from nasty 80's music videos, the way it flows and swirls as things move through it and has it drifts off a ledge - that in a Morrowind dungeon would look awesome) would be nice, sometimes.
I guess I just don't like games trying to be realistic in such a fundamentally unrealistic way. Someday I hope this improves, but I know it won't be a while - polygon tricks are just so much more efficient than point modeling so polygons will have to do until the power becomes available. I believe it will, just like polygons are less efficient than sprites but when the power became available, the flexibility and visual effects took priority.
CM0304, CoD, FS2004, SC4:RH, Trackmania, X2