1. Teleport to Anvil.
2. Walk to the waters edge, open up the map, and look for the small black island. The helmet is just off the coast on this island.
3. Get lined up with the northern edge of the island.
4. Keep repeating this, and searching the ground for a skeleton. Once you find it, he will be holding it in his hand. His hand!

Tips

* Watch your breath meter, don't die.
* If your character is an Argonian, you need not worry about your breath. Argonians have unlimited water breathing.
* Create water breathing potions
* enchant items with water breathing ability
* Beat the Quest "Go Fish" at Lake Rumare to get the "Jewel of the rumare", a ring which gives you not only "water breathing on self" but also 4+ athletics

Warnings

* Be Patient
* Watch your Breath Meter.