We LOVE our waterbed. The sheets are different than regular sheets, although when you buy them they are "short sheeted" at least side to side. The last set we bought I ended up cutting up the pillowcases and adding them to the sides! The sheet fit fine until you laid under it, nothing worse than having your side exposed because there isn't enough sheet! I like to buy 100% cotton sheets and not only are they hard to find but they are expensive for a waterbed. I literally wear them out.
When I have made quilts for our queen waterbed, It is usually just over full size.