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I created this using nParticles as a fluid emitter. The particles have a cylinder as a goal. The cylinder is spinning in Y, and is being deformed by a lattice, which is deformed by joints. The fluid emitter on the particles is set to inherit velocity from the particles.
The fluid has a negative buoyancy, causing the fluid to fall down after it is created (like dirt and debris falls down after being spun up into the air from a tornado. The fluid is set to collide with the ground plane, causing the larger base effect that you see in a real tornado. Finally, a volumetric spherical turbulance field moves with the tornado (parented to the base joint of the skeleton), and affects both the nParticles and fluid.