It's true. Your IC will dramatically lower temps, in effect, doing 1 of the things that what water injection is supposed to do. But the water vapor that serves as an inert gas pushes back the detonation limitations of whatever fuel you're using, so if you have a problem with knocking over (x) PSI with (x) fuel, using water injection will allow you to turn the boost up even more and extend that limitation no matter how efficient your IC is.

A lot of people run WI in lieu of replacing their intercooler because of the cost differential, but there's no reason why you can't run both and achieve more than 100% efficiency between both setups.

Basically, it won't hurt you or work against you. It all depends on whether or not you're knocking as to whether or not you'll need it, and my bet is that if you push 20 PSI on 9.5:1 pistons with pump gas, you're going to see lots of it. Watch your EGT's, and keep 'em under 850°C. If they rise over 850, you can benefit from it regardless. If they're below 850, adding alcohol to the mix can put a little extra fire under your ass. A little more power, too. Like I said, it's one of those things where you have to expirament to find out what works perfectly on your car. So, yes. It's like the SC/Turbo debate only with alternate fuels.