since Oby gave some insight as to where the possible problem is I started playing around with the .zon file. I didn't remove any zones or anything, I just disabled some collisions and moved one sphere up some and decreased it's radius. Result:
yes the sub is actually going through the bottom. That's not really the problem though. The problem is I did a 180 degree turn to get to the point in the screenie above. Before that 180 degree turn the terrain was sloping down at a shallow angle and the sub was hovering above the terrain. Do the 180 degree turn and sub is going through the terrain now. This means there is a problem with the game's terrain functions. It appears that it calculates a mean depth from a certain area of the terrain and uses that for the collision detection with objects
