As I was cleaning files off my desktop I stumbled upon the original raw video file for this and, since I was never happy with the way the original came out, I decided to re-render and reupload without all the laggy blurriness. Check the rest of the description for further clarification on some of the steps involved.

This doesn't require a fully tricked out ship. In fact, I've been doing this in Sequence 4. You'll want to head for New Bone Island in the Southern Seas and follow the steps I go through here.
Since recording this I have CONFIRMED these to be the top end level 60 Man O' War (70 power, 30 speed, 90 capacity, 150 HP) and I have CONFIRMED it to be as infinitely farmable as you can stand. It's especially useful if your fleet isn't full up on these yet or if you simply want to grind for gems, as each one of these babies salvages for 750 gemstones.

Edit: May 4, 2014 - There's been some debate in the comments as to whether or not this still works. I've tested it in my game, and at least for me it's still fully functional.

Edit: January 9, 2015 - It has been brought to my attention that if you destroy the two ships accompanying the Man O' War that it stops respawning. So if this isn't working for you, that's probably why.

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