I feel this might be the underlining bug that causes the following:

mobs don't spawn at night any more (zombie spawners do work).
passive mobs don't move (animals, villagers, don't move; zombies, iron golems, zombie pigmen do move).
arrows (and other projectiles) stop inches after being fired

If I had to guess; it would something to do with the campfire, and how it's smoke is stopped completely by some blocks, but passes (partly) through air/water; I'd guess that to make this work, air was set to be "somewhat transparent".