Sponges created with /setblock don't absorb water

Cannot confirm.
Confirmed, didn't follow directions correctly.

Setblock doesn't do a block update. It's similar to melting ice with a torch. You'll need to add destroy to force the block update

/setblock ~ ~ ~ sponge 0 destroy

But setblock does cause a block update. If do setblock water twice next to each other the water starts to flow

That works because the second sponge creates the block update for the first one