to remove the resource of water ice from the logistic puzzle entirely?

no, it prevents putting water wells on vulcanite planets for balance reasons
so yes, you still have to ship water ice or barreled water
if you want to remove water ice logistics, just don't use this mod, any only use waterwell and SE (and the other ones you're already using)

why only vulcanite planets? Can you use this mod to put a water well in orbit?

well that was a bit specific, vulcanite planets typically are water-less so that was my example, but water well with this patch won't work on any planet with the tag "waterless"
2. no, SE already prohibits that defaultly (i think)

the point is to make it not work on planets that are "waterless", if you want it to, just use waterwell without this mod