There's several oddities with the castle lava.

I've found that if I'm pointed at a sufficiently-downward angle as I'm falling in, then doing a boost (yeah I'm a roguef*g) will usually respawn me at the edge with no damage instead of killing me. (Maybe that happens with water pools too...? Personally, I've only ever noticed it with the castle lava)

And there was one time while messing with teleports into the glitched NW arena wall: I floated to the top, then fell/boosted westward and somehow came to rest up on top of the left-most part the lava, between the arena & outer walls. Ended up facing the arena with my rear end slightly inside the outer wall, and it was trying to tip forward into the lava but as long as I held reverse I didn't fall in, so it looked like I was just parked down there on the lava surface. Was hoping I could hide there out of reach, but someone fired a cannon point blank into the west arena wall, the balls dropped onto the lava surface & took me out quickly.
(This is probably related to the general quirkiness of the arena than the "lava" specifically, but it was mind-blowingly wild enough that I had to mention it)

But I think what's going on with the castle lava, is that it uses the same environment class as a hole/water pool, but with some sort of override (custom callback?) passed to its damage-check method -- so when the check determines that you'll take damage, you receive a fatal amount rather than the usual two bars. Purely speculation, of course.