SVD,
Great idea to talk with DNR. You may find the official rules a bit strict for your liking, but it is far better to find out where the boundaries of the law are and stay within them and show the agency that you intend to ask permission, find out the laws and follow them, than to have a gorgeous pond and find out later you crossed the line somewhere.

I agree, you will love having a water based feature to look at. If the DNR won't let you excavate to renovate, then at least ask what is allowed to preserve the original lay of the land and to improve the ecosystem (adding native plants, fish, removing non-natives, etc)

Keep us posted!