Water in a 3D skybox

I've set up a working 3d skybox and got water working correctly before,
but this one seems slightly bizarre to me. I've placed a section of
water in the skybox above the sky_camera so that it appears the water
is above the player. However, this results in a very weird effect:

http://img106.echo.cx/my.php?image=dmsaturated00006dl.jpg

The most bizarre point though, is that if I noclip out of the level and
then back in again, everything is fine and the effect disappears. Any
ideas? I've tried using and building cubemaps and converting it into a func_water_analog, but neither worked.

Originally I thought it was just impossible, but the official Valve
stuff says that 3d skyboxes:

Support materials with shader effects such as
normal mapping, water, environment mapping, proxies, etc.

P.S. This also acts as a slight preview of my competition map!

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Place it in your 'normal' level then- if you use a water_lod_control then it won't give you much more of a performance hit than if it was in your skybox. I've noticed similar things with my skybox water b0rking up, and had to move it into my level to fix it.

Thanks, but no. The distance needed to be covered is too big, and the
render distance isn't enough. On top of that, vrad takes ages (the vis
bit takes 2202 seconds alone).

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Have you tried making the water brush very thin as not to flood the
skycamera? I made an underwater map a while ago and I had the same
problem.

Gah! Sorry! Finally got back home to test it, but still no go. I've had
to abandon the idea for the map, so I'm just using vast quantities of
fog, which is a shame really.

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My site

make a animated texture and a custom skybox

it could be because your looking at the water from the bottom and thats a nodraw texture. try flipping to water upside down. you would see the animated water texture but that could resemble the same effect as actually going underwater and looking up.