how to simulate water with havok?
It depends what aspect of the water you want to simulate. If you want to simulate liquid flowing as a deforming shape, or something like that, I'm afraid Havok Physics does not support that.
If you just want to have your objects float in water, you could write a hkpUnaryAction to impart a buoyancy and/or current force. If you can find it, there's a good algorithm for calculating this for polyhedra by Erin Catto. I found it in this book.