Why Does this happen?

Heres the molebox exe

http://www.kamikazekrow.com/storage/terrain.zip

Here is the scaling info. The terrain was made from a 512/512 heigtmap with ALE.

ScaleEntity terrain,24,24,24
ScaleEntity skybox,25,15,25

It looks like your camera range is too short.

Yup, your camera clips the skysphere/box "corner"...

Thx guys. Fixed .

A good way of doing skyboxes is actually making them tiny so that you won't have to worry about clipping; the polygons are very near the camera. Then set EntityOrder for the skybox so that it is drawn first and not on top of everything.

Nice tip! I'll have to try that.