I often ask myself a very serious question with regards to this show: would I watch Charmed if Holly Marie Combs wasn't in it? Probably not. (At least from season 5 onwards...)
I dig Paige and think Phoebe is a very underrated character, but this episode does them absolutely NO favours. They come across as selfish brats. Annoying, selfish brats.
As for the fishy main plot, it's only somewhat redeemed by Piper's very real reaction to vanquishing a sea hag. It's the kind of demon that killed her mother, and it's something that'll resonate with long term viewers who saw the very solid episode 'P3H2O'. It tethers this episode down and is the only grownup storyline within this ridiculous plot.
Visually, the episode is a bit all over the place: the hag has some interesting powers - the water FX look superb and her suspended animation ability looked very cool. But the split-screen conversations and cheesy transitions gave off too much of a sit-com-y feel for my liking.
The Phoebe/Cole storyline is a bit murky at this stage in the game. It becomes even more muddled in part 2, making Phoebe come off as the lesser person. As for the 'cliff-hanger,' I wouldn't hold your breath...