Found the answer! Woooooot!

http://video.google.com/videoplay?docid=6874767442069509506&hl=en
Any ideas what's going on? The water is inside out it seems.
http://developer.valvesoftware.com/wiki/Troubleshooting_Level_DesignWater is invisible from above, but looks correct from below
Sometimes this happens if cubemaps have not been built yet. (Type buildcubemaps in the console.) It will also happen if you skipped the visiblity or lighting stage of compiling. The visibilty compile phase will not run correctly if you have a leak.
http://video.google.com/videoplay?docid=6874767442069509506&hl=en
Any ideas what's going on? The water is inside out it seems.