Really, objects could float in LBP with a different buoyancy stat. I would have thought they brought that over. Same with Water as a material. Seems like a lot of extra work for creators.
I am sort interested in this. The problem is more often than not style vs substance rose to the top in LBP since most people didn't actually play levels as they went for a quick look and moved on to the next.
I've been giving it a little thought but can't know for certain because I don't know all the settings:
We know you can turn solidity on and off but that can't be applied to the water itself because then the solid pallet would fall through. My guess would be an extra layer just above the water, used as a sensor. I'm assuming there will be a way of detecting whether an object is below or above (to left or right etc) of the sensor zone, shown in analogue form to enable 'intensity' or 'calculated distance'. This gives the pallet a point of reference for the animation.
Now, put a player sensor zone on either corner and join them in the centre (probably overlapped) along all edges. When the player approaches the maximum trigger point (of the corners) use that data to affect an animation to tilt the pallet down in that corner depending on the intensity (higher analogue value). How they do that I wouldn't know but I doubt it's by hand because it's too steady and consistent. But how do you get the 'edge' to tip equally if the trigger zones are focused on the corners? Between the corners, where the trigger zones overlap, add another animation which makes the full edge bob down. This would mean if Both corner trigger zones were active then animate the edge which would also be subject to the analogue value.
But there's also constant pressure there, or it appears there is. I can't be certain but it does look like if you stood on the edge and stayed there, the pallet would remain slightly submerged. This would suggest that it pauses the animation when a player stands there for any length of time. Then you have them moving around ...
I'm looking forward to digging into this thing.