This is an area where I have a LOT of experience... I just completed a HUGE diorama for the DDay museum in New Orleans, and I believe have created the best water I've ever done...

First, "yes" you can dye your gel. Commercial dyes and inks work well, and acryllic paint works well with Future or "Johnsons Kleer" (as it is called in the UK).

But for "depth true" water, nothing (NOTHING!) beats Envirotex EZ Pour-on. Working in layers of 1/8th inch per day, I created a water equivilent to about 2 inches (6-7 scale feet deep). Each layer of Pour-on was given some feature... perhaps streaks of a color, or a tinted strip of translucent blue film. Other layers received swirled sand (near the propeller), or small bubbles made with Plaster of Paris or pulled threads of cotton strands. The top layers were "pulled" into waves, with some foaming surf near the shoreline and on the crest of larger waves breaking on the reef-line. The finished result is "coming soon" to an article in the features section. Look for the finished scene to be on display on the second floor in the "Pacific" area of the museum, sometime near the holidays.