Water 7. Without a single doubt.
The setting, the whole Venice-meets-New York-meets-disneyland city, is just beautiful. The mist over the beach, the fabulously moody atmosphere as the Aqua Laguna closes in, it's visually magnificent.
In addition to many wonderful character designs, even for minor characters (Lulu, Tilestone, Iceburg, Franky Family, etc.), we also have villains who exude both mystery and menace, combining colossal and terrifying power with stealth and secrecy in a way not seen before in the series. Sadly, they lost a lot of their coolness when we get to Enies Lobby, but that's another story.
And, yes, there's the schism amongst a crew that's been nothing but sweetness and merriment since the beginning. The strawhats' greatest challenge comes not from a villain, but from their own crew- Robin's 'betrayal' and Usopp's mutiny- It's a nice counterpoint to the 'nakama' ideal the series is based on.
Also, let's not forget the greatest battle scene thus far in the series, or indeed in any anime I can currently think of. Luffy, and the one scrawny little coward who never learned to trust his captain.
Superhuman strength and unnatural power against guile, strategy and determination (Has anyone read 'Dark Knight Returns' by Frank Miller? Batman beating up Superman is the closest comparison I can think of). You can keep Gomu Gomu no storm, Ougun Rigle, whatever- I give you one single word:
"Impact!"
I felt every blow in that fight.
but im enjoing this one alot actualy... realy looking forward to the next chapter! 
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