Hello, ok to make water, if you dig deep enough u will find water, but, if you hit the water tool, well wat do u think IT CREATES WATER!
To change a small part insstead of the whole thing of the terrain paint, u have to hit the tool with 1 tile on it or more than 1 tile(right beside it) u can change the ground color. Pick 1 u like and start painting. Simple.
To change the terrain height, u hit the mound or dig tool in the right side-ish, it will dig a hole but if u hit the mound tool, u can create hills or mountains.
Well thats it, have a nice day!