I can't get the posted PNG (looks to be a grayscale 8-bit PNG) to do what you're showing with version 1.89 when using File>>Open to open it as either a grayscale image surface or a png surface.

What's happening is that the the purple stuff is where the sign bit (the highest order bit) changes from 0 to 1, meaning that Wilbur interprets it as negative values. Move your mouse cursor over the transition and watch the status bar in the lower-right to see the altitude change sign as the mouse across the transition. Note that Wilbur should never try interpreting PNG images as signed pixels, though, so I'm not sure what's happening.

How to fix this depends on how you're importing the data (that is, how you're saving it from The GIMP). If you're importing it as a raw binary raster, uncheck the "Signed" checkbox during the import. If you're importing it as some sort of image, do the following steps after reading the image:

1) Select>>From Terrain>>Height Range With How=Between, Operation=Replace, Minimum=-100000, and Maximum=-0.000001 to select everything too low.
2) Filter>>Mathematical>>Offset with an Offset of 32768 (if it's a 16-bit image) or 256 (if it's an 8-bit image) to lift everything up to the baseline height.