If you make the applet too large then you will notice a blank strip appear at the bottom of it as the waves lap backwards and forwards. Positioning the horizon On an artistic note, it is not a good idea to use an image that already has a horizon. If you look across the surface of a lake you will not see the horizon reflected in the surface. There is no problem using transparent GIFs for the overlay parameter - in fact this is recommended. You can usually tell if a transparent GIF has been used because the top half of the applet will have parts which appear to be upside down.
Some web browsers have trouble opening applets straight from a hard disk.
I have noticed this happen with Internet Explorer 3 and Netscape 4. This is an applet, it is intended for use within web pages. You can't open it directly. If you try, it won't harm your computer, but neither will it show you the applet. Class files are binary files, just like image files are.