I think I know why this is happening but don't know how to fix it. I can't really explain why I think it's happening though, sorry. What were the values you set everything to to make it lava?
TransformPosition -248 -312 270.33
Rotation 1 0 0 0
Scale 96 96 1
Debuggingusedepthmask (Check)
RepeatTerrain (Check)
MediaSurface Texture - add-ons/map_hell_Underworld/lava1
Shore texture - add-ons/map_hell_Underworld/lava1
envmapover texture - add-ons/map_hell_Underworld/lava1
envmapunder texture - add-ons/map_hell_Underworld/lava1
submerge texture0 - add-ons/map_hell_Underworld/lava1
submerge texture1 - add-ons/map_hell_Underworld/lava1
specularMask texture - add-ons/map_hell_Underworld/lava1
fluidliquid type - Lava
Density - 1
viscosity - 47
surfaceWaveMagnitude - 1
surfaceOpacity - 0.75
envMapIntensity - 0.4
TessSurface - 50
TessShore - 60
SurfaceParrallax - 0.5
movementFlowAngle - 0
FlowRate - 0
DistortGridScale - 0.1
DistortMag - 0.05
DistortTime - 0.5
Depth FxShoreDepth - 20
Depthgradient - 1
MinAlpha - 0.03
MaxAlpha - 1
MiscAudioEnviornment - (none)
RemoveWetEdges - (uncheck)
SpecualarColor - 1.000000 1.000000 1.000000 1.000000
SpecualarPower - 6
WaterColor - 0.2000000 0.6000000 0.6000000 0.3000000
Draw Distance HackUseCustomFog (uncheck)
customFogDistance - 800
customVisabilityDistance - 1000
Dynamic FeildsParams2 - 0.39 0.39 0.2 0.133
extent - 100 100 10
SeedPoints - 0 0 1 0 1 1 0 1
Floodfill - 1
Params0 - 0.32 -0.67 0.066 0.5
textureSize - 32 32
Params1 - 0.63 -2.41 0.33 0.21
envmaptexture - Common/Data/skies/Sunset_0007
Params3 - 1.21 -0.61 0.13 -0.33
Thats all the data with the Lava - Waterblock