It looks like an "Invisible wall" effect, You could send me the map so I can have look at it.. Other than that, is it the only place this is happening? It could just be your "dynamiclight" function being set to disabled in the options.
I'll Gladly send u the map. Just tell me when and how. And yes that is the only place it is happening but thats probably cause thats the only water in the map
The fastest way would probably be mailing it to MortanLestaria(at)gmail(dot)com I will look at it as soon as I get the chance, You can also reach me through MSN, the same address only replace gmail by hotmail.
Added after 3 hours 35 minutes:
The problem causing the water to cut the fog is the fact that "bFogzone" Under the WaterZoneInfo's Properties is turned off. Enabling that should fix the problem.