Good stuff dude! Nicely done, the only improvement I can think of is adding an overlay to the lower part of the character, so it looks as if he was submerged. There are tricks to get the draw order you want.

Now, as the title suggests I have an idea. How cool would it be if you could drive into water, and instead of hitting an invisible wall, there was a big splash and the vehicle slowly sinks afterwards? I think that would be very cool. I wanted to do this myself, but I just can't make good graphics. I could do the scripting though.