No, he is not able to do this. The rule is: "The Water Spirit cannot enter the ship." There is no difference between a boat and a ship. Moreover, the use costs time, but the water spirit moves (up to) 4 spaces.
I don't know... I think she CAN move over the water for fighting creatures and she CAN NOT enter the ship because of the ship movement mechanics, but boats - another mechanics.
Also Kheelan and Arbon even in the base game are most weak characters - and "no boats" rule make he almost useless...
I think about homerule for water spirit... maybe... converts 1 land space move to 2 sea space moves.
As for Arbon... He have 2 dice less, than archer and throwing one by one - worst dicepool! So he can lose 2 points of damage just because of dicepool. So i think about to not reduce the reward. Not in the Legend 4, because this ability was designed for it.
Well, she moves up to 4 spaces for 1 hour (Kheela´s time). Example: from space 102 to 108 = 5 spaces = 2 hours. Use the boat = 2 hours. It makes no difference.