Jewmpaloompa... If set with Hidden Nationality it would not need a Defending Unit or attack or defense. Then any Unit can occupy the same tile as the Unit (Waterfall).
One of the rather confusing things here is if we are wanting a Defending Unit animated with another Structure or simply an added animated Structure for the map.
Either way, they still cause issues to think out and work around because both are not "usual" or provided for in the Editor.
IF the Waterfall is wanted as a "Structure" that you want other CIVs to Capture, it would need to have a Defending Unit and No Hidden Nationality.
IF the Waterfall is wanted just as an animated Waterfall that would stay on the map, water Flowing, then it could be added as the "Waterfall unit" and set as Immobile with Hidden Nationality and no attack, defense. There would be no need in setting it as another Unit.
This would have visual problems though because when these Hidden Nationality Units have another Unit on their tile, you will only see the other Unit and as a Waterfall, this would look strange for it to vanish when another unit steps on the Mountain and we only see the other Units Default animation.
Just as the AI "Knows" where the Barbarians are out in the Undiscovered areas in the CIV game, they "Know" where the Hidden Nationality Units are because That IS the Barbarian Setting and what the AI is Hard Coded to "Think" these types of units are but with no attack or defense, No Fight.
Still you will see that the AI will tend to go to their tile on the Map as if they can get to them...this would cause the Waterfall to vanish most of the time. IF it is set as a UNIT with a Defending Unit, the problem is that it can not only cause Wars but the issue of if it is in another CIVs Territory, they will demand that you move it. Because it is set as immobile, you cannot and when the Game automatically moves this immobile unit... we might see a Waterfall hovering in the air over a desert tile for example
The Best Way to think about how to use the "City Units" or animated structures that are actually Units is to remember that they are Units. IF you have a Game that is a Scenario and you can control the Territory that is Owned or will be expanded into as the CIVs influence expands and they gain more territory, you can set a "Unit" where it will not cause Wars or have to be moved. It is important to also take into consideration if a City is Captured that is close to the "Unit" and expands, will the "Unit" then fall into another CIVs territory.
...IF you have an area that is not and will not be accessible to any Unit, you can Pre-place a Unit that appears to be a Structure with animations that can add some Cool Variety. Otherwise, you have to deal with the above stated issues. "City Units" were first made and intended as another CIV to Fight so they had Defending Units and appeared to be Cities the same as normal Cities in a Game... The idea of also adding Hidden Resources under them added yet another usable factor.
It would be Great to be able to place animated Structures that were Not Units on the Map but that is not available with CIV III, Conquest and PTW...so depending on how well one can work out the Problems involved with trying to add such "Unit" structures, the
illusion that a Unit is a structure is after all, a
UNIT 
.... I think that would be easier..
