Type problem when optimizing

The following code snipped gives the following error:

;;;*** Warning in %SET-CREATURE-Y-POSITION: Declared type (DOUBLE-FLOAT * *)
and value type FIXNUM are disjoint.

The warning goes away if I remove the "(the float" down at the bottom but
the code bombs trying to put together mismatched types under high
optimization. 

I can't figure out why it considers either (aref location 1) or
(terrain-vertex ...) to be a fixnum.

If I put in a (declare (ftype (function (fixnum fixnum) double-float)
terrain-vertex) after the terrain-vertex definition it will give the same
message, seeming to indicate it is expecting terrain-vertex to return a
fixnum. 
I have verified that name/symbol terrain-vertex does not appear anywhere
else in the code and might be causing a conflict.

Any thoughts? 

Thanks,

brad

(defun %set-creature-y-position (creature terrain)
  (declare (optimize (speed 3)(safety 2)(hcl:fixnum-safety 2)))
  (let ((location (location creature))
        (vertices (vertices terrain)))
    (declare  (type (simple-array double-float (3)) location)
              (type (simple-array single-float (*)) vertices))
    (flet ((terrain-vertex (x-pos z-pos)
             (declare (type fixnum x-pos z-pos))
             (let* ((width (width terrain))
                    (adjust (the fixnum (/ (1- width) 2)))
                    (x (+ x-pos adjust))
                    (z (+ z-pos adjust)))
               (declare (type fixnum width x z))
               (let* ((sw-index (* 3 (+ x (* z width))))
                      (ne-index (+ sw-index (* 3 (1+ width))))
                      (sw-Y-value (aref vertices (1+ sw-index)))
                      (ne-Y-value (aref vertices (1+ ne-index))))
                 (+ 0.1 (max sw-Y-value ne-Y-value))))))
      (setf (aref location 1) 
            (the float
            (terrain-vertex (floor (aref location 0))(floor (aref location
2))))))))