You can import terrains from tg1 to tg2 by using height field load. You would need to set the loader to be the same dimensions as the imported one and such. To match camera position you would need a little more trickery. As terragen 1 if i recall correctly from my terranim converter, uses y as screen depth, where as terragen 2 uses y as up/down, z as screen depth. Also the camera is done in different rotations.
If you want tomorrow I could whip up a quick java app that can convert a single tg1 camera location into a tg2 camera location.
As for water, you probably will just have to eyeball it once you have everything else in place, or try copying the same location it was at in tg1.
Also, have you tried navigating the 3d preview in tg2? It takes a little more getting used to then 3d preview in tg1, but it works very nice.