Sugarcane can be placed in water as long as it is on a valid block and that block is next to a water source. The water does not wash away the sugarcane, and updating the block does not fix it.
This is vanilla behavior. To my knowledge, the only change FC has made to the sugarcane block is allowing it to be placed diagonally from water instead of having to be at the water's edge.
Yeah, in this case it's more a mater of having eventual plans to update sugar cane to be more inline with the rest of Vegehenna. That would likely involve an entirely new block ID so as not to mess with existing builds, which is why I'd avoid making a change like this now.
Won't fix for now, but with the above this is likely something that will be corrected with time.