Yes, "along" in English has a sense either of movement the length of something or of being stretched out beside something. I suppose this sentence might make sense to me, if we were talking about some very large group spread along the waterfront, but even that would have a rather exotic flavor.
That's a great suggestion, although then I have never heard anyone referring to eating even by the water or near the water, since one is on a boat and the water is all around. Eating on deck or eating by the window I have heard. Even then, using the preposition "along" would sound odd to me. Even if one were moving, it would be more typical to say "my wife and I ate our lunch while walking along the water" rather than "my wife and I ate our lunch along the water." That, honestly, brings to mind the picture of the lunch having been previously strewn along the waterfront and we were just eating bits as we came along them.