<So am I correct in understanding that you are selectively blending multiple 2 sec water exposures to create one image with smooth looking water surface that also has texture (as opposed to water that looks completely smooth and almost featureless as a 30 sec exposure might produce)?>
Yes - that is exactly right. It's all done in camera and produces a single NEF. It's an easy way to simulate the effect of a strong ND filter. The effect takes advantage of the fact that there is motion between frames, so the combination of multiple exposures works very well. I've used this with the D300, D800, etc.
For water, I think the better effects are with exposures of 1 second or longer. Seven exposures of 1/100 sec still look choppy. Seven exposures of 2-3 seconds looks like an exposure of 30-60 seconds - about double the cumulative actual exposure time or more.
I still prefer a ND filter and use the Vari N Duo, but this is a good workaround when I am just carrying a CP, or when the VND does not create a long enough exposure without going to an extreme.