(sorry about the delay, been busy recently)
Hmmm... I see the issue... but don't really understand why this is happening. I'm not sure if I can fix this?
The item goes through the recycling process, but simply doesn't complete, and the machine is effectively jammed until it's mined up and placed back down, which is not good. The last time this happened, it was back when Factorio's algorithms would prevent item results larger than their stack size, so it could be that there is a liquid "stack" limit being reached here?
EDIT: It doesn't look like fluids have "stack sizes" (at least the vanilla ones don't), so I'm definitely not sure how to fix...