Yes it has an build in terrain editor. I didn't use it much yet, just played around with it. Dunno how many textures you can use on it, the max i had were 8. But the size doesnt matter.

The Terrain editor is great, you can easily deform and paint it with different brushes, like in Photoshop. You can draw the trees, grass, etc on it. And you have a button for creating a lightmap.

Normal/Specular maps are easy to set up. Create a Material (rightclick -> Create -> Material) and change the option to Parallax Specular or whatever you want, and choose your texture. Done.

Never used water in indie. I guess it looks normal since you can't use Render To Texture in Indie.