Having checked with very high gl_picmip values I can't get them to interfere with reflections (the r_water cvar Mirio listed and I'd alluded to earlier in the effects menu).
It's strange if you have somehow got reflections switched off as the mapcfg for Stormkeep specifically sets r_water to 1 and would override any configuration where OpenGL 2.0 is enabled. Also if you disable reflections you don't get a blurred texture, you get a green grid so you probably don't have them disabled.
All of the cvars to control reflections, refractions and warpzones are all r_water* so have a look at these and reset to the defaults until something works properly. The mapcfg also specifically sets the reflection detail too so you shouldn't have a problem with that. If not, it's your picmip value causing problems and that shouldn't really be interfering. Again, more details on the hardware would be interesting and why it does not perform so well.
I'm at least a reasonably tolerable person to be around - Narcopic