I'm not sure that the growth rate of a mud volcano is substantial enough to increase that much in height over 12-18 mths, to provide a bigger obstacle than the sea-bed bathymetric survey from May to December 2014 would show.
I would imagine that a pure and simple navigation error would likely be the highest possible reason behind the collision with the mud volcano.
Perhaps there's strong currents near the sea bed that pulled the towfish out of its normal tracking course, and caused the collision.
As far as MH370 being buried in a mud flow, that is entirely likely, particularly if the aircraft landed in deep mud when it settled to the sea bed.
There are large areas of very soft sediment in the sea bed in the search area, and I don't know what the ATSB and Fugro have considered, with regard to finding the aircraft, if it was virtually fully concealed by mud.
I would imagine the travel speed of a sinking aircraft fuselage would still be fairly substantial as it approached the sea-bed - because the shape of a fuselage would encourage speed through the water as it sank.
Thus there's the potential for substantial burial of at least the major portion of the fuselage, thereby making the fuselage wreckage extremely difficult to spot.
I have not seen this angle discussed anywhere in the reams of search information - but I'm guessing the ATSB is just plainly confident the tools that Fugro are using will find even a substantially-buried fuselage.
They have found two shipwrecks that are obviously badly decayed and spread around after a century or two on the sea-bed - so I guess the searchers are confident that they can find even the smaller pieces of the wreckage of MH370.
My personal opinion is that the fact that they have searched for so long, and not found even the slightest trace of any debris, leads one to conclude the aircraft is not in the current search zone, and at least some of the calculations used are seriously wrong.
Those calculations, of course, are the ones where the greatest doubt exists - as to aircraft height, speed and throttle settings - and where extrapolated figures have been used.