Hmm... It's been awhile since I have played SM64, but as I recall you have to reach the jewel on top of the huge pillar that juts up from the lowest area in the level (not including the underground part).
Or, you can try backflipping into the level in order to begin with the water level at its highest... I don't know.
<Hinopio slaps himself for being a rambling and syntactically impaired moron>