Air to water ICs are only about 50-60% efficient (compared to a good air to air IC's 70-80%). You have identified the main problem, which is a 5-6 psi boost drop across the present IC. A good air to air IC will have only a 1+ psi pressure loss. Eliminating the present restrictive, under capacity, IC is worth trying. WI or a water/alcohol mix likely will do as well, or better, in cooling the intake charge and have the bonus of getting rid of the big pressure drop. The injection will also gain the much higher knock threshold on pump gas. Nothing to lose by trying it. You can always go back to the current IC system, and take another approach.
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