how to do animated waves? or you mean just the simple effect of the normal mapped loops on the flat panels that is the sea?
No, I used a complete scene the boat the wave water and all of the sails and flags were all 1 animated activator that way I could sync everything from the boat tilting with the waves to the particles splashing off the bow.
My animated wave water was 100 units below below the true water surface that way you could not see it from on the boat until I wanted it to be seen -> the actual animation was with 18 morphs there were 6 per wave height (no longer possible for Skyrim as the game no longer supports the NiGeomMorphController, it can be done with bones though its going to be far more difficult to look right).
to have a more distant horizon so I need to use a heightmap?
I didn't for Oblivion but in my mod jumping into the water was basically instant death from the creatures in the water, depending on your circumstances it might be a good idea or not.