That water bitmap is totally wrong, Wrench.
It needs to be an 8 bit bitmap, 512x512 resolution. Here's a brand new one which should work properly: NAfrica_Water.bmp
@PFunk generally, terrains with very little water areas (such as my Iraq terrains) have no working water bitmaps; the assigned fleet zones (green for Blue Side, yellow for Red Side), when too small, are totally disregarded by the game engine. The above water bitmap should have big enough areas, thus it should work properly. Water bitmaps must be 256 colour, 512x512 resolution and 257kb in size, otherwise the game engine will totally disregard them; most painting softwares save them with slightly different sizes (256kb or 258kb) and this must not happen. I suggest the simple Paint by Microsoft for saving such files.