Update: With the introduction of the ocean biome in beta 1.8, it is possible to play in a "water world" without needing to raise the sea level, by finding a seed which starts you in the middle of such a biome. Seeds can be found wherever Minecraftians congregate, including the official forums and Reddit.
Even with a world editor, you cannot flood "the whole world", because the world is procedurally generated as you explore it. The best you could get would be to flood the areas of the world you've already seen.
Instead, you should look for mods which affect world generation. A quick search of the mod forum turns up the Phoenix Terrain Mod, which has a waterLevel setting (default 64) as well as many others which may help you achieve the effect you're looking for.
