Is you version updated to the latest patch? It used to be that the Hellfire improvement did not have any <TerrainMakesValids>, and thus the spell to create it was not able to be cast anywhere. In patch e Kael gave it <TerrainMakesValids>, for every type of land terrain in the game I believe.
However, it does still have a python requirement. The first thing this does it only allow the Infernals civilization to cast it. It would be better if this requirement was handled in the xml since that way it would be clear from within the game that it is supposed to be Infernal only.
If you are playing as the Infernal, it still blocks the spell from being cast in cities, in water, and on other improvements. Actually, I'm pretty sure that improvement-creating spells have this blocked in the SDK too, is this is really unnecessary. It also blocks you from casting within a 2 tile radius of an existing Hellfire tile, and blocks the AI from using it outside of their territory (I'm not sure why).
Oh, and when the spell does work the improvement will generate Orkish Barbarian Champions instead of Demons like it is really supposed to. I personally think that the old Demonic Champion UU needs to be reintroduced so hellfire produced hellish units.