Modified version of the MCEdit smoothing filter https://github.com/mcedit/mcedit/blob/master/filters/smooth.py. This version smooths under water correctly, uses the surrounding terrain blocks for fill, and both raises and lowers terrain correctly.

smoother.py

from numpy import zeros, array
import itertools
from pymclevel.level import extractHeights

terrainBlocktypes = [1, 2, 3, 7, 12, 13, 14, 15, 16, 24, 56, 73, 74, 82, 87, 88, 89]
terrainBlockmask = zeros((256,), dtype='bool')
terrainBlockmask[terrainBlocktypes] = True

inputs = (
    ("Repeat count", (1, 50)),
)


def perform(level, box, options):
    if box.volume > 16000000:
        raise ValueError("Volume too big for this filter method!")

    repeatCount = options["Repeat count"]
    schema = level.extractSchematic(box)
    schema.removeEntitiesInBox(schema.bounds)
    schema.removeTileEntitiesInBox(schema.bounds)

    for i in xrange(repeatCount):

        terrainBlocks = terrainBlockmask[schema.Blocks]

        heightmap = extractHeights(terrainBlocks)

        newHeightmap = (heightmap[1:-1, 1:-1] + (heightmap[0:-2, 1:-1] + heightmap[2:, 1:-1] + heightmap[1:-1, 0:-2] + heightmap[1:-1, 2:]) * 0.7) / 3.8
        newHeightmap += 0.5
        newHeightmap[newHeightmap < 0] = 0
        newHeightmap[newHeightmap > schema.Height] = schema.Height

        newHeightmap = array(newHeightmap, dtype='uint16')

        for x, z in itertools.product(xrange(1, schema.Width - 1), xrange(1, schema.Length - 1)):
            oh = heightmap[x, z]
            nh = newHeightmap[x - 1, z - 1]

            column = array(schema.Blocks[x, z])

            # fill with terrain blocks from whichever adjacent column is at least as high
            if nh > oh:
                if terrainBlocks[x-1, z, nh] != 0:
                    column[oh:nh] = schema.Blocks[x-1, z][oh:nh]
                elif terrainBlocks[x+1, z, nh] != 0:
                    column[oh:nh] = schema.Blocks[x+1, z][oh:nh]
                elif terrainBlocks[x, z-1, nh] != 0:
                    column[oh:nh] = schema.Blocks[x, z-1][oh:nh]
                elif terrainBlocks[x, z+1, nh] != 0:
                    column[oh:nh] = schema.Blocks[x, z+1][oh:nh]

            column[nh:oh] = 0 # clear removed terrain blocks
            column[nh:63] = 8 # fill with water from new height up to sea level 

            schema.Blocks[x, z] = column

    level.copyBlocksFrom(schema, schema.bounds, box.origin)