Nonsense, Xietor.
The problem has multiple facets, with long strung out waterways.
First, it doesn't "force" underwater conflict, as you show with the strongest power out of the water being the one that made peace in the water.
Also, it severely limits underwater mobility, so those early aquatic wars become brute force tug-of-wars in narrow channels. With more solid water terrain, raiding and other tactics become viable, beyond just "my army must beat his army in province X, if it does I win the war, if it doesn't I lose".
But beyond that, I have 2 major complaints with the long skinny stretches of water, and I think they become the 2 primary reasons that water nations rarely win games, beyond considerations of the national capabilities -
First: While aquatics can (and should) get onto land early in the game to get a foothold, they still produce most of their elite forces underwater. Your coastal castles can build "something useful" usually, and your inland castles make nothing but indie troops. The severe lack in most maps of adequate places to put decent underwater castles (most spots have 2-3 neighbors), puts a severe limit on production of a nation's best troops (such as Icthycentaurs, or Shamblers of the Deep - let alone 40ish resource Basalt Pillars). Ironic that you used R'lyeh as your example, again, as most people rely on lobos and Illithids, which only require 1 resource apiece.
Second: The logistics of Dominion spread force aquatic nations to struggle to not be Dom killed, let alone to propagate their own beneficial Dominion just for the benefits that they spent design points on.
In my opinion, Glory is bad enough for aquatics, but this Fallacy map is even worse.