So the way the sponge is functioning right now.

You place sponge (non boosted or boosted) and it removes the water.
But if you try to use regular water mechanics inside the sponge affected space the water does nothing - won't flow or anything even when the sponge is broken.


The blue concrete here represents the area which is "sponge affected" from a sponge placed shortly before. Note how water does not flow when inside or flowing into the affected space.


Placing blocks does not cause a block-update to make this water flow either.
This behavior is consistent with the default 5x5x5 and the boosted sponge areas.

Essentially if a player places water inside or around a sponged area it should still function like normal water. Right now sponges permanently disable water flow in the area it is placed and used in.