Both. I extract a slope map from the data. This makes all lake surface white, and their banks not white.
I load this into Photoshop and use a magic wand with a tolerance of 1 (contiguous, no anti-aliasing) to select the lakes.... invert the section and fill with black. I usually use a satellite overlay to verify that the flat area I'm selecting actually is a lake, but I haven't done this one yet so some of the small lakes may be a bit odd.
This is a really good method because it uses the same data as the terrain. I add a slope restriction just to keep things tidy. This should also make it work reasonably well with the lower res terrain where smoothing will raise some of the areas covered by the mask.