I wrote in comments to second version with different formula that I didn’t rally like it. Shore waves there are more wave like but they look not as magical as those ones :D Enjoy.

New additions:
Lined cursor like in version 2.
Control over many parameters:
Bias – controls wave behavior. Smaller it is more oscillating waves are but you risk making them go insane :)
Shift – something like and average in the formula. Below 128.4 leads water level dropping and higher then 128.6 leads to water level rising.
WallC – well I can’t rally make walls here so under the walls there is some constant water level. And this number controls it. Set to 0 to make walls behave like holes or 255 to behave as water source. I prefer somewhere near 70 :)
CursorC – water level under the cursor.
CursorS – size of the cursor.

Other controls:
Check Edge to turn FindEdges on.
Use random to create random waves.
Click and drag to draw walls.
Click clear to clear out the walls.