I still think you should use sin curves.
In physics class, to show/define waves, you use sin curves, even (or especially) for water-waves.
it would be something like:

var startTime; //set this at the total_ticks value when the wave is started
VECTOR* startpos; //set this to the position of the
var waveSpeed = 1; //(speed of propagation? is that what you call it?)
var myDistance; //distance from this vertex to startpos (with vec_dist)
while((total_ticks-startTime)*waveSpeed < myDistance)wait(1); //wait until the wave has reached this vertex.
startTime = total_ticks; //now start time is the time at which it starts to move
my_vertex_height = max_height*sin(2*Pi*(total_ticks-startTime)/waveSpeed);

max_height would need to decrease, of course.

Also, this is (obviously, it's only for one vertex) just pseudo-code, but something like this could work for making it fps independent, because the wave would spread at an even rate.
There must be a reason why physicist use sin functions for waves.

[edit] tested the fluidsimdemo1. It's much better, and the pullling with your mouse to get the effect idea was a very good one!
When clicking on one of the vertecies on the edge it doesn't come back down though, and, as Vet said, it's still not FPS independent, making it "jitter" much too fast on faster computers.