Willing to provide a world download and a location. However, the download is not small. If someone wants it, please reach out to me at Lothsahn at yahoo and I can certainly provide this.
This happens on Java 7 Update 40. I have not yet updated my server to J7U45. I will retest on 1.7.4.
I also should not that this doesn't appear to be related to an Nvidia driver bug. I have an AMD video card and am seeing the problem.
I just created an amplified world and filled it with waterfalls to try to reproduce the bug. I was not successful. Please let me know if you need the world file (or want access to my server) to reproduce this. It happens on all clients that connect.
Both are attached.
It's so frustrating that despite offers to provide worlds demonstrating the problem, detailed descriptions of the problem, and 23 votes, a significant bug like this is still present.