After working with a guide, we think that it maybe something to do with the stone below, somehow preventing it, but its clearly not in the normal matter, like its somehow larger then it should be.
Also in the area with the water, at first the issue was i was not able to lower it, it would give me the lowering animation, then give me dirt and say it couldn't terraform this area, the same message as with the stone. after i forced my way around it by digging all the way around, now trying to fill it results in the same issue, this time we cannot raise it, and give an unable to change message