Is there a set way to overlay a texture with a transparent one? Or does this not support transparencies? I'd like to make a water overlay and have a lua effect that slows down motion below a certain point on the map through lua. But part I want to know, though, is about the transparency/overlay.

The only way I know of doing that large of a transparency is either a seriously gigantic and laggy glow matrix (each glow is square, in a matrix instead of a monolithic glow because glows are no longer rendered if their center is offscreen), or a giant MOSParticle with half the pixels missing in a grid, like old Genesis games did for transparency.

Can't you run a Lua script that makkes a huge glow follow the controlled actor?

That would work for if you wanted the entire scene to be under water...
I suppose you could have it do so for the lateral motion. I dunno.