Surf hits both oppenents, so it accually be better than Hydro Pump (I never use this move, it sucks). For Hydro Pump you woould be clobbered by attacks for the other foe. Hydro Pump has horrible accuracy and with Pressure, Hydro Pump can only be used 3 times. Waterfall activates psysical contact abilities, so it's not that good. It's weak. Surf rules over Hydro Pump.

Edit:About not hitting you ally, I think the one using Surf gets in front of their ally, therefore not hitting the ally. Also, the farther the target is from the start of the wave, the more powerful the wave is.