Small races are already hard to see, but it appears that while your character seems to do a swim animation on your own client, it does not do that for other players.
I stumbled over a Thane on EV in the North West corner, who was sitting inside the lake. The dwarf model and the nametag were fully submerged and virtually invisible, because the character model was, for some reason, not at the surface but sitting a full character model below the water.
Even the name tag was fully underwater and barely visible at all.
Suggestion: Disable sitting down in water to prevent abuse.