And then made some changes to it so it looked more cartoony. I enlisted the help of Looki to make some initial changes to his lens shader so I could add colour to it etc...
If anyone buys the same fluid effect (the licence forbids me give away his code!) then I'd be happy to help with the additional changes I made.
I have made a bunch of improvements to what I purchased, and in fact I was ever so close to having it work without buying his code haha, I was missing one key component, was an "ahah!" moment when I saw it. Comment edited by Rox Flame on 7/11/2013
I bought the Water Physics engine, it comes with some shaders applied. I modified the shaders it uses, I'd be happy to hook you up with the shader code if you go down that path.
The performance depends on how large the water particles are, I've made mine pretty large as it suits the grid based game mechanics. Each particle is 16px circle with a larger display area so the overlaps can aid in making the fluid look merged into one mass.
I can fill the level about a third to halfway up with water before I notice lag kicking in. So I do need to limit the water somewhat, but it does perform pretty well.
I'll upload a video sometime soon so you can see it in action, the water refraction and shimmering effects I have in there look really nice in motion.