Just cause I was asked, I barely find time to check my private messages at the moment. I have updated to 1.2.5 and removed the surface effects of the previous version. (If you like them simply use the shader folder of the previous version instead of the new one.)
I have fixed a bug with the water surface effect in v5b.
I decided to call this version 5, since I have added a few surface effects. If you don't like them, there is an option to disable them via the config file (Surface effects (on/off) parameter).
Alpha v5 screenshot:

Older screenshots:
Downloads:
1.2.5:
Version 5b*:
Download
Direct download:
Download
Version 5b for modloader (requires a modloader installation)*:
Download
Direct download:
Download
1.2.3:
Version 5b*:
Download
Direct download:
Download
Version 5b for modloader (requires a modloader installation)*:
Download
Direct download:
Download
Instructions:
1. copy the files from the Minecraft folder to the minecraft.jar
2. delete the '/meta_inf' folder in your minecraft.jar
3. copy the '/shader' folder to your '/bin' folder
(If there is no '/shader' folder in your '/bin' folder create one; or simply drag the whole '/shader' folder to your '/bin' folder.)
A config file is found in the shader folder. It can be used to change parameters such as:
- Visual: water color, waterfall color
- Performance: there are a settings for disabling parts of the reflections and to decrease the reflection resolution
- To disable water effects use 'water_mode 0'
Incompatible graphic chips
- ATI X1200 or lower
- Graphic cards without GL_EXT_framebuffer_object support
- Graphic cards without GL_ARB_shader_objects, GL_ARB_vertex_shader and GL_ARB_fragment_shader support
- Mobile Intel® 4 Series Express Chipset Family (or lower; will in some cases result in the invisible world bug)
Execution problems and possible solutions:
- Minecraft runs out of memory
solution: change these two settings in your config.txt
anti_aliasing 1
reflection_resolution 2
- An exception with: 'cfgGrassFix'
Possible solution (no guarantee): use the modloader version when having modloader installed
- java.lang.SecurityException: SHA1 digest error for px.class
solution: delete the '/meta_inf' folder in your minecraft.jar
- fast flickering in the water
solution: disable advanced opengl in your video settings menu
- black texture borders:
(see: Thread)
Some fan videos of the recent versions:
Changelog alpha 5:
- Modified 4f surface effects
- Option to disable them
Changelog alpha 4f:
- Added "surface caustics"
- Added fresnel fake
- Fixed a few bugs in 4e (waving sky)
Changelog alpha 4e:
(- Was e for quite a while, I simply changed the topic.)
- Removed debug console output in modloader version
Changelog alpha 4d:
- Lighting through new light engine (the ice still does not look 100% equal)
- FBO.class fix integrated into this version
Changelog alpha 4b:
- Changed waterfall color back (red colored texture pack textures)
- Increased waterfal diffrafction a little
- New config settings
- Basic anti aliasing
Changelog alpha 4:
- Slightly improved performance
- Added config
- More colorful water
- Framerate independent animation
- Diving out of the water error partially fixed
- Further improved reflection plane picking
- Nether portal fixed (still not fixed in the modloader version)
- Rain improved
- Waterfalls are now affected by fog
- Cloud reflections in the water off by default
- Player reflection in first person
- Pre OpenGL 2.0 support
- No more GL_EXT_packed_depth_stencil required
- Starting up the mod automatically disables advanced OpenGL
Changelog alpha v3b:
- fixed glowing ice
- fixed transparent walls in darkness
- increased waterfall visibility
Changelog alpha v3a:
- slightly increased water color
Changelog alpha v3:
- Non-planar water (waterfalls) no longer produce reflections
- Ice is rendered in standard minecraft fashion
- Reduced reflections, in specific around the player
- Ray-Casting variation to determine on what water plane to reflect
The mod requires changes in the following classes: Tessellator, RenderBlocks, EntityRenderer
Limitation/Known 'bugs':
- Invisible world probably on Intel Chipset Graphics (hopefully fixed)
- Popping artifacts due to the change of the reflection plane may occur
- In Advanced OpenGL reflections are sometimes not displayed correctly (view frustum culling removes objects required for reflections)
- Around water borders thin incorrect lines may occur (in the current version these artifacts are normally found at corners)
Known incompatibilities for the default version:
- Modloader (there is a modloader version; to install: start from a project using modloader; then copy the water shader files)
- OptiFine (Install watershader over optifine and switch graphics to fast - how_to_optifine)
- Forge API
- Better Than Wolves
- Finite Liquids
[This list may be incomplete or wrong, since other mods change all the time.]
Since I was asked to add a donate button, here it is. I don't think many will use it, but if you do thanks a lot.

Old downloads:
Thanks to the MCP project, which made it possible to create this in a short time.
PS:
Thanks for the feedback in this thread, I tried to include as much as possible.
Also thanks for the videos about this mod. And thanks for the downloads, and special thanks to the eight donates I have gotten so far
PPS:
* I have decided to put up and adfly link as well, since if i don't look somebody comes up and wants to make money out of my mod (already in alpha). Which makes me feel real strange. Therefore I added an option to adfly myself. Feel free to use the regular download! and I hope nobody is offended by this offer.
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