I love the use of already available water instead of just summoning it from nowhere. It matches the "use what's there" vibe of the witch class, and matches well with the lack of pure creation magic in the setting.
I think the mechanics of the "continued casting" need to be clarified a little better. Does this change it into a full-round casting time, or does this mean a second standard action used in the next turn (and therefore allowing the caster to run around the body (or pool) of water while continuing the cast? Depending on how we do this, we might want to consider allowing the caster to continue casting for (caster level / 2) times, given that the body of water is large enough to sustain such a fog bank (and given that we do not exceed a level 1 spell slot capability with it... Not sure how to word the game mechanics if we overshoot the slot's capabilities)
As far as I understand the conjuration school, the spell would still be a Conjuration (Creation) spell, as it is manipulating the existing matter into a fog, and the created fog falls apart when the spell effect is ended. The water descriptor seem fitting though, so we should keep that.