Kindly help me with my Pearl Dio.....??

Since you're doing a forced perspective diorama, I highly recomend that you do it in a shadow box.. Then you can control the viewpoint, and you can hide the rod that supports the Zero in the rear wall.  As for the smoke, I usually shy away from it since it's so hard to model effectively, but were I to do it, I'd use cotton, yes... Painting it would have to be in shades of brown & black, more black the closer to the source..

As for water, Pearl was pretty calm, so I'd use painted plaster with a layer of Envirotex for the gloss..

KAYSEE,

Here's a link to a picture that is (somewhat) like what you are wanting to model.  The battleship is not the Arizona, but it may give you an idea for your model layout! 

http://www.rememberingpearlharbor.org/images/pearlharborattack.jpg

Here's the Arizona burning in the aftermath of the attack:

http://www.history.navy.mil/photos/images/h97000/h97378.jpg

Like Hans Von Hammer said, a shadow box or forced perspective diorama is your better option for a dio like you've described, otherwise your viewers may wonder why you built 2 different sized models for one dio.  But who knows, you may build this without forced perspective and pull it off very well and teach us all something new?! 

I am no expert on water, but use the Forum Search tool to find some other posts on how to make water; like anything there are many different ways to portray water.  I also recommend Shepherd Paine's book "How to Build Diormas;" there is a good section in there about methods for modeling water.  I've also heard of using part of a frosted shower door with the texturing on it; then painting it various shades of blues or greens or whatever color you want you water to be!  Cut out where your ship will be, then use clear acrylic caulk (bathroom sealant) for waves and water around the ship; it will come out of the tube white, but dry clear.  Then brush paint your waves as desired.

As for the smoke cloud, for a neat idea look in the 2009 issue of Great Scale Modeling, page 46--there is a Red Baron vs. Snoopy aerial vignette and the modeler used "Halloween cobwebs colored with chalks" to make a smoke trail.  Pretty cool, I think! 

To have a flying model, you will need to use some sort of rod.  Most of the ones I have seen are clear acrylic, with a diameter large enough to support the weight of the built airplane model.  I'd say search/look in the Aircraft forum for tips--there are modelers there who can fill you in on the details of "suspending" an in-flight aircraft.

Hope this all helps you out! Good luck and keep us posted!

I've also heard of using part of a frosted shower door with the texturing on it; then painting it various shades of blues or greens or whatever color you want you water to be!  Cut out where your ship will be, then use clear acrylic caulk (bathroom sealant) for waves and water around the ship; it will come out of the tube white, but dry clear.  Then brush paint your waves as desired.

I used that method on several doiramas back in the 80s & 90's... The problem today is finding the right textured-doors or (in my case) drop ceiling light-panels... I keep my eye open for junk piles outside homes & apartment buildings undergoing renovation or remodeling... (A good scratch-builder never misses a chance to dumpster-dive, lol..)

You talked about 1:48 plane and 1:700 ship and Pearl Harbor. What a coincidence. My modeler built a 2X2.6m diorama using a lot of 1:700 ships. According to "Art Instructor" the builder, the finished diorama has 30 Japanese planes in 1:48 scale flying (hanging) a few meters away in the background, heading to the site.

The diorama was built for commercial purpose, promoting the movie "Pearl Harbor" in 2001 and was on display at a theatre in Bangkok. 

Some pictures are available in this page:

http://www.falconbbs.com/model12d.htm

Some years ago, a guy showed up at a contest in Connecticut with several similar projects. He used plexiglass boxes instead of the traditional one angle shadow box. I don't hink he used 1/48 aircraft though. IIRC, they were either 1/72 or 1/144 with 1/700 ships. The dios worked nicely and were about 18-24 inches in height. He used lint from the clothes dryier as basis for his smoke.

I think having a 1/48 a/c rising from the smoke of a 1/700 ship is going to be too big a difference.