1.  Open Bryce and click on Stone

 

move the stone half into the ground. Click the little "A" next to the 
selected stone and set the stone to "negative". 

 

Same with the ground but this one to "positive". 
Select both the stone and the ground then
group the stone with the ground by clicking the "G" and you have a hole in the ground.

 

Now create a "water plane" and move it down a little so it is "under the ground.

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