Thanks @TheFrentic, I've been having same issue.

Commenting this on here and the mod page itself. At least in the current water world version, water from all sides like the description says leads to having zombies spawning on water, to avoid this, use settings to flooding from only one side, I used: Water comes from south, south water limit: 0 south starting point 10000000, south wave days: 0 water enters buildings, teleport zombies. DISABLE water from north west and east

any idea why my zombies are spawning on the ground level (in water) and not dying? they aggro to me and attack when i try to swim around downstairs, especially on the stairs going downstairs

Make sure you enable the alternative zombie spawn zones mod. Thats the one where you can edit indoor locations

Could you clarify your zombie pop settings? All I can see is:
Advanced Zombie Options
3.0 Multiplier, No respawn

WoooOw GRaEp!