in the example on the right, the depth fade approach would only give you a gradient along the depth intersection, which means it would outline the shape of the cylinder under the water. It would not extend nicely out from the silhouette like you probably want. But if the slope under the water is gradual, so will be the depth fade. In the past I have used extremely low poly ‘bulge’ shaped meshes and placed them under the shore for make this look better.
And I have also gone with the second imported heightmap approach. it is a pain since you have to keep it syncronized with your landscape changes and you also have to manually set up the world extents. But its not too hard, in fact there was a material function released with the Kite demo for exactly that purpose.