The whole watermill block seems a little, er, odd to me. Power from static water?
How about the standard single block (I've seen elsewhere that people want big animations but not me ) It must have flowing water directly above it and an empty square beneath it for the water to flow out of, ie it must have a flow of water through it. In other respects it would be a standard generator.
This would make for a good addition in mountainous terrain where a small stream could feed a single mill or they could be grouped into large machine halls as if they were turbines in a hydroelectric plant.
If you then wanted to go full on, maybe 4 mills in a cross with 5 iron/ refined iron, whatever for balance, makes a proper turbine. massive plume of discharge water is, of course, optional.