Fleet will be fought on coastal as army. I'll come to that in the army type section. But here is a preview:

Fleet is a short-hand notation for "army-with-boats". A fleet will fight on a coastal province. Two fleets will fight on a near by beach.

Rationale of this is:
1. Since there is no real naval battle in MTW, all battle must happen on a land map.
2. It is not uncommon to have armies using boats to transport, but fight on land.
3. We don't want the simplistic "boat" system of MTW. We may want a system where the sea is controlled the same way as the land is controlled by army, to fully use the entire map for strategic purpose.

I will not follow strictly the Diplomacy's naval rules either, because it may not be suitable for MTW. But the idea of "army-with-boats" is borrowed from a variant of Diplomacy.

EDIT: to clarify further: a fleet is a real army, not a single boat. It only differs with regular army in the ability to go on water and the restriction of not able to support or attack inland province.

Annie