I really like this idea although I'm not sure if it would be possible or not...
It would be probably be simple to add a dam but we don't currently have actual water just tiles that dont move (no waves or tides)...That being said, what would happen when the dam was blown up ( or nuked for you noookie fans) we'd end up with a wall of blue tiles ( I wonder if PT's and LVT's could travel "up" this wall?) So water would have to be coded...then damaging effects of millions of cubic feet of water would have to be coded not to mention the physics portion of the game engine would have to be modified to work with water flow...
Don't get me wrong, I really do like this idea, I just don't think it'll happen anytime soon...