Welcome here first of all.
If you want smaller waves you can easily adjust them, keeping in mind that sizes are in meters in Terragen. Bring the largest size (10m) down to 2 for instance. You can also adjust the amount of reflection. It's 1 at default, but people often decrease to 0.8, also to see more underwater. You can also play with the patchiness. The example seems pretty patchy.
Also, with hard clouds they will be reflected as such. If you want smoother reflections, you can either use different clouds, or use smooth reflections in a reflective shader (add after the water shader and set reflective to 0 in the water shader). Smooth reflection settings should not be much higher than 0.04, or you should increase samples (or blockiness may occur).
Using the Path Tracer will give you smoother wave reflections anyway, if the 'min highlight spread' in the water shader is kept at 0.01. The bigger that size the softer the reflection.