I just noticed this recently. At 1st I tought it's a bug caused by RWTT mod but than the waterfalls would disappear completely. This is something else I think. When I stay close enough the waterfall it looks normal but if I go far enough it turns into a texture w/o animation. It looks ugly. Was wondering what things do I need to tweak in my SkyrimPrefs.ini to change this.

That's the game.

The mod Water enhanced this, but the problem doesn't go away.

Other than bumping up ugrids nothing you can do to change it as far as I know.

Like I said before Water does enhance them and animate them slightly, and I believe they are working on making them animate properly forgot to mention.

Wouldn't it be possible to tick "is full lod" on the waterfall objects? Wouldn't that make them animate from far away?

I use WATER on my experimental version with ugrids at 9 and the only thing I run into is tree skinning(that can be fixed just need to take the time to experiment).