To be fair, I set mine up like it's actual running water. Not shown in the latest video yet, but it's got these "rain collection plates" that trickle down to the water wheels.
Because I agree, it would be so much better the way you described. But since IE is meant for immersion, I build all of these into a place in the world that makes sense, including the running water required for the water wheels. Even the lightning rods will seem ok if they're part of a bigger thing that looks awesome enough to match it. That's what IE is for, IMO. It's because you want to have some cool looking water wheels and wind mills, but since they're going to be there and moving, they should give you a little bit of power, too.
But, I watched some LP's lately (chromecast FTW, or as DW20 would say, neat!), and it seems like a lot of people would just make the wheels, put buckets of water where a guide told them to put it and be happy with it. I can't get behind that at all. You're using the wrong mod if that's what you're doing.