Not tested yet, but should be possible with cloth and a water shader effect on cloth texture, but the performance of big levels like HydroThunder is questionable.

My suggestion is better to use Vertex Texture Fetch Water effect.
http://developer.download.nvidia.com/SDK/9.5/Samples/samples.html

Links thats maybe helps:




Regards, Robert

Quote
Everything should be made as simple as possible, but not one bit simpler.
by Albert Einstein

PhysX Preview of Cloth, Fluid and Soft Body

A8.47.1P