I had always thought there were two explanations for the red water, one the tru7h, and the other a myth.
1. (Tru7h) Connacht melted the Trow's iron cities. Since then, the rust from these "Pools of Iron" has seeped into the water supply, turning all water in the vicinity red.
2. (Myth) When the Trow slaughtered the Oghre, so much blood was spilt on the plains of Avernus that it has never completely washed out of the water, forming lakes and "River[s] of Blood."
When I say "Myth" I mean a myth that the inhabitants of Mythworld believe.
