What?Never seen that before.
This happened to me before on my pool house. It's the main reason why I stopped working on it, I couldn't ever figure out what was causing it seeing as I had no intersecting cubes or cylinders.
I'm trying 3DS Max right now... It's difficult but amazing what you can do with it.
I used that years ago when I made stuff for Halo CE, I never understood it. It can't hurt to take another whack at it though.
Interiors will be removed entirely in near future anyway, so this won't really even matter.
Split the city in four parts and the problem should be fixed. Remember to back-up your Torque save file first.
There certainly aren't blue splotches now ...