This is the clip of interest from last week's Dev Stream, particularly about when stuff is and isn't wet.
It's hard to extrapolate cause the topic switches from Water Balloons and Creatures to the dummytarget not being able to get wet since it's a debug thing.
Based on that, I don't know what the intended mechanics of Water Balloons are.
Regardless, Water Balloons don't make mobs wet.
It only works on Dfly and players cause they have the moisture component to them. Adding the moisture component to other mobs in the game seems to cause extremely severe FPS issues, which is probably why the game checks to see if the world is wet in order to assign wetness to creatures (and the moisture component drastically weakens electrical weapons as a whole for other reasons).
I don't know what the intention or design behind Water Balloons were either, only the information that I mentioned above. I've seen a lot of players think that Water Balloons makes things wet (cause of it's name and intuition), though it works differently cause of how it was coded after some investigating.
Don't know if its worth the effort to rework Water Balloons either (waterprojectiles.lua is it's file in the prefabs folder).
Maybe some sort of system where X number of Water Balloons just adds and removes the wetness tag after some time on mobs/structures (without the use of the moisture component so that FPS isn't an issue)?
I don't know. ¯\_(ツ)_/¯
Throw Water Balloons at a mob (pigman). See that the number of hits is the same with and without throwing water balloons at it. Do lots of investigating to learn the Water Balloon mechanics.