Heh, sort of looks similar to my roller coaster test video on YouTube here, along with the forum post .. guess I should be flattered someones trying to replicate it
Happens when water gets changed (usually after viewing a dl'd scene).
I don't know which config var is responsible so I usually just go in the Phun/Algodoo folder and delete the config.cfg file, then start the game and it should generate a new one.
Depending on which Operating System you're using, the config file may also be in your My Documents folder in either Phun/Algodoo, I would check to see if you have a config file there, if so the game is probably using that one.
Alternatively, if that still doesn't work, re-installing Phun/Algodoo may work.