The thing is, you really can't. It's just not possible. Even if you did manage to pull something like that off, to have such a crazy amount of physics going on would surely crash most people's games.
Here's one way I think you could achieve the effect of a volcano

Create nearly 100 billion instances of microscopic spheres and keep sending millions of them flying out of the center of the volcano. Each sphere would have the gravity calculations that the players have, so they'll fall and naturally hit the slopes and keep sliding down. Once they reach the bottom of the slopes, have them very slowly travel in the direction they're facing.
Ok, I admit that if that was actually done, it would probably look like an explosion of red confetti blasting out of a volcano, but the fact of the matter is that this kind of thing just simply cannot be done, not without making it look totally unrealistic anyway.
The game Bioshock is a perfect example. That game was highly praised for its amazing water effects. But besides the overall mind-blowing appearance of the water, there was no real free-flowing water that actually acted on its own. The only water you saw was water that was already in a puddle on the floor, or falling from a hole in the ceiling, only giving the impression that it is filling up the puddle it is pouring into, when in actuality, it isn't.
Now of course there were cases in that game where a room actually did fill up with water. It wasn't random though, it was always through some kind of event that would've happened the same way for everyone. And to make a room fill up with water is complete cake compared to this, since the water is only going in one direction, up, and it can be just a flat image of water slowly rising to the ceiling.
I also read that there were a lot of people hired for this game to work on JUST the water! Can you imagine the total amount of time and dedication that was put into this game's water? And still there was no such thing as any kind of water that acted on its own in this game.
Games don't have exploding volcanoes because there is no feasible way to do it. The physics of liquid actually being put into a game is something we probably won't see for a very long time.

: