it looks like the shader programs have compiled but aren't running (they turn black when there's some problem with it running on the GPU. The material compiles still, so it's not white.), which is pretty strange. Rumour is that FeralHeart has no shadows due to the reflective water bits, so I guess this is a problem with Ogre 1.7.1 (and/or thereabouts), as WolfQueen said.
I did go a bit overboard with posting code snippets, I suspect a lot of coffee that day... Anyways, you will only need to assign the water a new material in the code if you want to make a reflection toggle button. replacing .materials works too.
Since the water isn't white, you must have placed it in your resource path. Ogre parses the `resources.cfg` in the binary's directory by default and loads all the stuff it finds in the paths defined in the file. sorry that had confused you, but I pretty much meant drop the files in one of those folders.
As a side note, it looks like Ogre 1.7.4 (As used in Dragon's Den) can do water reflections and shadows. Upgrading may not be so trivial, but not impossible, if you want both.