http://urbanlegends.about.com/library/bl_niagara_falls_frozen2.htm

I read this story in school. They found sunken boats and ancient Native American artifacts where the water had subsided. It was on the USA side.

The Niagara River handles 212,000 cubic feet of water per second. The average depth is approximately 16 feet with a flow rate of 4 to 8 miles per hour. The Niagara River does not freeze over. The Falls of Niagara and the river below the Falls does not freeze either. The volume of water going over the Falls, the depth and speed of the water below the Falls also precludes freezing. The water will not be stopped or frozen solid.

The ice bridge however does form at the base of Falls and over portions of the Niagara River below the Falls. The ice bridge is formed in late December to the end of February and into mid March dependant on the weather.

Lake Erie which drains into the Niagara River is a large lake but rather shallow. By the end of December, the entire lake surface is frozen over. Although an ice boom has been put into place since the 1960's at the mouth of the Niagara River and Lake Erie. The boom holds back most of the ice but not all. When the ice goes over the Falls in volume the ice freezes to the edges of the gorge and builds upon itself until the river is covered in this giant layer of ice. This layer has grown to eighty feet thick in the past and currently 40 feet is not uncommon.

The Falls of Niagara still flows as does the water under the ice and the ice shelf seems to rise on layer of air that builds under the ice surface.

This picture was never dated... It's believed that this image is actually from the Historic Freeze in March of 1848.. The falls went dry due to an ice dam in Lake Erie... http://urbanlegends.about.com/library/bl_niagara_falls_frozen2.htm