The lake tool should be raising the water, to wherever it is, that’s not intended behaviour. It’s defaulting to the water zone base water height instead of using it’s own. The link to the water zone is the possible problem, but that happens automatically. I’m not sure if there’s a force relink debug, I know there’s a couple of commands. Working on testing them to verify now.
Did the texture artifacting only occur while sculpting manually? This should be temporary while it re-renders but apparently not. Does it change when you change map and come back?