Ahhhh, water. Can't live without it, seems to be trying to give everyone a heart attack. The two things that persistently give me that obstructed error are - you haven't quite leveled out every inch of terrain high enough (remember, the water rises in fixed depths of 1 meter, so if your terrain is raised to .9999999 meter - it'll be 'obstructed'), and paths; there's a path to close to some seeping water and of course the paths can't get wet without melting.
It's easiest, if there is a path nearby, to remove them all and see if that's the problem. Otherwise, it's fighting the terrain.
And, yeah, at first the new terrain tool worked great but now it doesn't make a depth that's actually deep enough. What I've had to do is use the new tool, then go over it again with flatten terrain.