I made a lava engine using metaballs. I think it's pretty effective.
<img src="https://dl.dropboxusercontent.com/u/28087823/lava%20flow/lava%20example.png" border="0">
I also needed a filter that would stretch the top of the screen, to reinforce the sense of the lava stretching and flowing. So I messed around in the Stretch effect, eliminated the X axis stretching and gave the Y axis stretching a parameter so you can control its Y position.
Here's the online demo for the lava engine. Just left click and hold, to pour lava anywhere. Right mouse button erases ground tiles.
Here is the effect
Here is the CAPX (requires effect above)
And here is a livedemo and the CAPX of just the effect itself. All it does is create a fixed size linear displacement.