You could always use sand or gravel to fill the water in. Buy at spawn for $200 eco's for 2000 blocks and start placing them without even going into the water. It's what I was doing, or you could always use the sponge and place the dirt or whatever without drowning. Still, whatever you do is still going to be a lot of work.

Good Luck.

 

i placed one layer of dirt easy, and i am not using world edit to destroy a town i do everything manually to save money.

 

I see the future involving many more underwater domed towns :)