I really don't think that water in quarries causes lag. For one thing, whenever I go around quarries filled with water, I get no/negligible lag. The lag comes when either the water source is removed to drain the quarry or when someone uses WorldEdit to delete the source blocks. Secondly, if you look at the wiki or in NEI, moving water clearly has a block ID. Therefore, it is a block and not a entity. This can be tested by looking at the E value in the F3 menu in game. As you can see, the difference is small. I think that the quarry lag problem could be solved by creating a new rule: If you create a large water filled quarry, do not empty it. And anyways, most quarrys are made far away from loaded chunks and wouldn't even make a difference after they are completed.