I am not sure how to make a texture of water make waves and stuff. I know how to do it in Render, but not BGE (Blender Game Engine). Any help would be appreciated.
The only way that works well and looks great in the BGE, is creating an animated water texture.
Having real geometry to create displaced waves in the game engine would look cool, but it is very memory intensive and would cause your game to lag.
To create an animated texture for the water, there are quite a few steps. Here is a video that describes the technique used to create the water used in the Blender Game "Yo! Frankie".
Video Summary: Step by step tutorial that shows how to create realtime animated water for the BGE using animation maps.