Yeah.. that's going to be really difficult. Maybe impossible. Simulating water is difficult. Not impossible, but because water is not a solid it involves lots of calculations. Most games use water as oceans or lakes, the water body's position is fixed. This allows for lots of assumptions that reduce the CPU load. Having water that behaves as a true fluid would require something much more complex.
Your idea with the spheres is a good one, I have seen implementations go down that route, but it's much more complicated than you probably think. Check out some of the free books here under GPU Gems to see some implementations of water: http://developer.nvidia.com/page/home.html