TerrainControl has had a persistent problem where liquid source blocks do not flow. As of the early 1.12 releases, this has not yet been fixed. However, I just discovered a workaround.
It's simple. Instead of using block names for flowing liquids in your
Liquid resources or BO3's, use the block ID's. So instead of
Liquid(8,20,100.0,8,128,STONE). Block ID 8 corresponds to flowing water, and block ID 10 corresponds to flowing lava.
This isn't really a fix for the way block names get translated into block ID's for flowing liquids, but it definitely solves the problem from the user's perspective.