Does the grass really need a shadow effect? That just seems a bit...excessive.
No no no, grass doesn't cast shadows. It's shadows ON grass (just like the oblivion graphics settings, except it actually works and there's no way to turn it off). So, say, a tree or your character will have their shadows also cast on grass, that area of grass covered by your shadows will be darker etc. It's a quite subtle thing and doesn't have any performance impact for me anyway. Previously if you stood on grass and viewed your character, your character wouldn't cast any shadows on the grass.
what does underwater look like now what did it look like before (yeh i need these things side by side to see the differences)
Underwater now has a depth of field effect (distant objects like shipwrecks appear blurrier the further they are), the transition while diving underwater is improved, and if you try to look up at the sky while underwater the water has a distinct ripple effect. It's basically what was shown in the gamejam video under 'enhanced underwater visuals'. Pre-1.5 the water just appeared like a color filter and was too 'flat'. Now it feels more like water. Here is a video: http://www.youtube.com/watch?v=eNOXJ76mbxM although I should warn you that it's based on the beta patch and doesn't really capture the DoF effect very well.