By hide do you mean go transparent, or disappear?
Indeed I did, however this is due to a separate cause, and is also reproducible with other blocks.
OptiFine is most likely the root cause of these issues.
Bug resolves itself for me once I transition to full screen, however returns when I move back into windowed mode.
In MC-78527, it does indeed work as intended, as Sonicwave points out: "It's similar to how when using /summon, skeletons don't spawn with a bow in their hand, and mobs never spawn with armor/weapons unless you specify the weapon." So by nature, summoning an air breathing entity such as a dolphin underwater, the entity will have no air to breath. Just because something may work with a spawn egg, does NOT guarantee it will work the same with summon. The summon command (as far as I know) is designed to 'summon' said entity with, by default, nothing added. TL:DR, Searge is right. It's as intended, and he should know 😉