It is possible to have subs travel under water. It's also possible to have them stop diving/surfacing part way through the process and have just a conning tower/periscope showing above the water.
It's been a while since I've used a sub, but the trick to it is getting the spacing of the waypoints right. I can't remember if the sub dives/surfaces when it reaches the waypoint with the action or when it is on its way to that waypoint.
Either way, when it comes to the next waypoint it will stop whatever it was doing, even if there is no action at the next waypoint. So by putting waypoints close together you can arrest the sub in mid-dive.
BTW, if you want to see what a sub is doing, you have to look at it in a 3D view, rather than on radar, as sometimes submerged subs show up on radar.