Easy way to create a lake is to
1) alter the terrain so it contains the geometry/shape of the lake
2) than just put a very large rectangle or square model (or sprite) with a water texture (+ water or reflection shader/material) near the terrain. Adjust the height of the 'lake' to alter how much of the terrain is underwater.
Search for shaders on this forum. Iirc there is Steampipe's water shader, some shaders in the ultimate shader compilation (by Slin?) and probably some more.

ps: GED is buggy, maybe try Sivan's map builder if you don't want to use WED or by script.