I tried SSAO today for Skyrim via NVCP (Tried all settings, MW3 setting too), and it works great except for the fact that at a certain angle or getting close to something the AO just turns off until you face a different angle or move, popping in basically.. really strange .. does anyone else know how to fix this? or is it just the way it is with Skyrim?

If you went close with a torch equipped or a light spell on, SSAO should fall back -at least that's how I remember it working. I don't recall seeing it popping in though.

The underwater scenes become almost hilarious, where SSAO gets infront of the water's murkiness and while you can't see the underwater clutter, you can definitely see their shades

I wouldn't say these miscalculations are Skyrim's fault, as the feature itself comes with nVidia's drivers. The good news are that, apparently, Bethesda is working to bring native SSAO support on Skyrim itself. Hopefully, they will be able to do it much better than the currently offered, generic approach.

The NVIDIA driver does Ambient Occlusion, not SSAO and there is nothing you can do about it really because it's implemented via the driver. I didn't hear anything about Bethesda implementing SSAO in Skyrim.

You're right, it's Ambient Occlusion.

However, I'm sure you saw Bethesda's gamejam video. Among spears, soulbugs, flying vampire lords, the big mudcrab-mama etc, there was Screen Space Ambient Occlusion & Enhanced Underwater Visuals.

Surely Mr Howard was quite clear about how unclear it is about what, if, when and how will be released. Still, my money go definitely on those 2, despite what else might come out along.

It was just a weeks fun, nobody knows if any of that will get into some DLC up update unfortunately.

You don't implement an update into a graphics engine and then let it rot. You just don't do it, even if you're going to leave everything else out.