Without any testing I am going to make the assumption that Flesh Sacrifice is scripted to make a blood puddle, as it isn't actually caused by you take health damage as if hit by a weapon. The reason why you don't bleed electric water being that it doesn't apply the blood modifier in the script, it's just scripted to make a blood puddle of the same dimensions every time.
Sooooo, try to put it in the suggestion box? It seems a little strong using it with polyskin on an already strong race, but yeah, you have to admit it doesn't make a lot of sense why it wouldn't work that way.