I can help you with the terrain question. Make a map in a paint program that is in grayscale. Black is low terrain, white is highest, grays are somewhere in between. Make sure you save it as a .bmp. In MED, click File->Import->Import Terrain from Pic. Then select your map from there.

I have found that even though it gives the option to use a .tga file, it does not work correctly. Bitmaps, however, work just fine.

There are a couple of cheap-reflection-water-type tutorials here...

http://au.conitec.net/