The stone wall does not clog the wall, making it visible underwater, and when the block is placed, the water will flow out.

Duplicate of or related to MC-124988.

This would definitely relate to MC-124988 and does indeed appear to have something to do with chunk borders. The issue here is that the water from the "water aquifer" doesn't get correctly updated when interesting a cave. I can confirm in 1.17.1 Release Candidate 1. Here is the information required to reproduce this since the current seed + coordinates no longer demonstrate the problem.

Caves & Cliffs 1.17.1 Release Candidate 1 Datapack Preview
World Type: Default
Seed: 63654350
Coordinates: /execute in minecraft:overworld run tp @s -338.49 -1.00 -63.82 281.75 0.64

Thank you for your report!
We're tracking this issue in MC-124988, so this ticket is being resolved and linked as a duplicate.

If you would like to add a vote and any extra information to the main ticket it would be appreciated.

If you haven't already, you might like to make use of the search feature to see if the issue has already been mentioned.

Quick Links:
📓 Bug Tracker Guidelines – 💬 Community Support – 📧 Mojang Support
📓 Project Summary – ✍️ Feedback and Suggestions – 📖 Game Wiki
_{-- I am a bot. This action was performed automatically! If you think it was incorrect, please notify us on Discord or Reddit}