hi dave,
there are various ways of getting round the problem you describe. although im not a miniature traction engine builder (miniature locos being my thing) ive driven and steered a few fullsize traction engines.
the easiest way to solve your problem is to place a white painted strip of brass behind the water gauge with diagonal lines marked on it in black. in fact most of my locos have nothing more than a strip of white card behind the water gauge with black lines added with black biro.
schellbach gauge glas is another option, but is more brittle than ordinary gauge glass.
i dont approve of balls bobbing up and down in gauge glasses and they dont give a clear reading in the event of bubbles forming and arent acceptable in miniature loco practice.
there is a flourescent dye you can add to the boiler feed water/boiler. this was used in power stations (and still might be). i had a great friend in the SMLS who used this on his miniature locos.
cheers,
julian