Neuspadrin is right, the auto generate check box in your height field is un-checked, click it on and see if you get the same problems.
As for water, there is a roughness and wave scale slider to tinker around with, but to be honest, I've never been happy with the results when I try to create sea waves with it. It's better for still water, like err lakes. What you can do, is turn off all the wave settings to zero, and then use it like a surface shader to add colour, reflection and refraction, to a series of power fractals. That way you have far more control over the shapes. Perlin and Perlin Ridges are good noise types for this application. Be carfull how much distortion you put in, ie the smallest scale, as this will eat up render times the further away to the horizon it tries to calculate reflections. But with this method, you can turn off the water shader, and use a blue in the PF whilst you work on your island to save time for previews, then turn it back on for final renders.