Waterfalls are just a breeding grounds for bacteria especially when the water isn't changed every day or so. If he drinks from it and you change it and clean it every day than keep it in. The best place to get a cage is LLLreptile. You can get a nice screened in cage for about 80-90 bucks...
Looks like you already have some good advice.
-ditch the water fall
-a LOT more plants
-It looks like it's not very high off the ground, it's recommended that the basking spot be at least eye level or higher
-and with the size of that cage a 40 watt would prob work to be on the safe side...