There's two main issues as far as I can see:
Tobacco smoke from the shisha is normally pulled through the downstem and then hangs about in the chamber after being bubbled (because chambers are big and it has more great distance to travel before reaching the end of the hose. This is fine for tobacco smoke because it's lighter than air, hot and doesn't condense or dissipate readily but e-vapor tends to sink into the water and condense at the sides.
The other thing is that some components of the vapor dissolve in the water. It also looks a bit stupid!
Possible alterations:
Shorter hose
Less water
Shorter downstem
Move flavourful e-liquid
I have much larger hookahs but the problems are even worse with them.
Ideally, you could have a small bowl full of liquid (heavily diluted) with an atomiser quit different from current ones. The air is drawn such that it lowers pressure in the bowl and draws air and liquid into the atomiser, which vaporises the liquid and then sends it on its merry way into the downstem. It would need work, but it would be absolutely cool if it worked. The pressure sensor would be after the water stage (e.g. at the bottom of the hose, so that the liquid was heated by the time the negative pressure started to pull at the vaporised liquid).