Ok, I started the program;
Put a water layer at 4m of altitude;
And noticed this strange island in the heitfield patch;
I didn't change the heightfield settings.
The camera is at 2153.95m of altitude.
The lake object follows the curvature of the earth, but to help match geometry in other applications the heightfield defaults to a 'flat' basis. You can make the heightfield follow the curvature of the earth by unchecking "flatten surface first" in the heightfield shader's displacement settings.
Matt
Ok ;)
Ah good to know... noticed that too, a while ago.