So touching hydrophobia means a few things.

No longer can people use hydrophobia to get login-long undispellable morale bonuses.

And now hydrophobia will work as it was intended to do, which before it didn't due to some buggy coding.

What does that mean practically for you hydrophobic folks?
Hydrophobia duration and severity increases. Before, neither actually were.
Hydrophobia's increasing morale penalty will ACTUALLY affect your morale now (it wasn't before).
Hydrophobia has some extra negatives when you've been under the water for a long time.