If I remember correctly to get transparent water the level also had to be re processed through the "vis" program with a transparent water flag set.

vis did a precalculation for where a level segment(the partition in binary space partition) could be seen from any other level segment. the end effect was that while glquake did have a option for transparent water, the geometry would not draw on the far side. making the effect useless without a bit of extra work. But I have to admit I have no idea if entities(other players) would draw or not.

update: found this https://quakeone.com/forum/quake-help/general-help/4754-visp...

Apparently there is a no_vis option to run without the visible set optimizations.