scubohuntr,
FEFLOW has a two-tier termination criteria setup which is similar in some ways to the PCG solver MODFLOW uses (the FEFLOW solvers are much more sophisticated than MODFLOW's PCG solver). The "inner loop" criterion is the termination threshold which you reduced from 1e-8 to 1e-10 (there are also controls for max iterations of the inner loop). This allowed FEFLOW to do "more work" in solving your problem. The "outer loop" criterion is under the "numerical parameters" part of the "problem settings" menu. It too controls how much work feflow will do to solve the problem. The outer loop has three controls, the error tolerance, the way error is measured and the number of iterations per timestep. The inner loop is executed many times for every iteration of the outer loop.
In the outer loop, if you switch from L2 to L1 or Max error, FEFLOW will do more work solving the problem at each time step. However, if you do not give it enough iterations to do more work, the solver may terminate prematurely. Premature termination of either the inner or outer loops may result in significantly large error in calculated total head, pressure, saturation, etc. This error can propagate and grow with each time step and may result in a very poor result which may show up as obviously incorrect water levels or mass balance, or significant oscillations. However, the error may not be obvious and the only way to know for sure is to runs a series of tests on solvers using different settings.
When you decreased the inner loop setting, FEFLOW was forced to do more work in solving your model. This resulted in more complete convergence. The large difference between the two solutions suggests that more test should be done to better understand the model's performance.
Pete