I'd say right below the waterfall if there wasn't a villager there.
But I agree inside the U shape would be nice. c: Or down by the cliff above the beach, in that little area by the beach entrance (near the dock) if it would fit.
Inside that U shaped river would look nice and have the advantage of being able to get across the river quickly. I don't think I've ever seen a river shaped like that before. That's interesting.