It is bad, it just has Silvermaiden syndrome where a last hit situation versus itself (or in this case, itself and another troop that can’t deal spell damage to it) results in an infinite stalemate (and therefore probably a retreat and loss for the player). I don’t think there is anything inherently wrong with this, thats one of the reasons why there is a retreat option (although it would be nice if a retreat just forced an instant loss so you could keep any resources accumulated, since it counts as a loss anyways).
Overall, I’m finding submerge currently a minor annoyance mechanic as I said when it was first introduced. I was a bit worried when the description appeared in the game files that it might null damage from things like Infernus or Ketras, but as it is now, applying to only full AoE damage spells it only applies to a handful of troops that anybody uses, and the AoEs themselves are often the least threatening parts of the troops. Also, very few things that have submerge are threatening enough that they can actually push through to a win versus the better teams that use AoE, unless they don’t have any spell damage other than AoE and they have very little or no board mod (which, again, the best AoE troops do). Taking a defensive stance on invade is often a losing strategy that eats up four times as much time even when it wins because every time you drop the turn you are giving them another roll of the dice to trigger an RNG event that will make you flat out lose. It would be nice if submerge were a bit more universally usable as a beneficial status, but also a bit easier to remove, as per @Jainus’s suggestions.
Basically, the intent behind submerge was more than likely to force you to make different teams to deal with it as a threat, or be able to use it versus teams with heavy AoEs. The reality is that it might just take a bit longer to reach the victory or defeat screen. Even in the scenario in the original post without submerge, they would have had a hard time damaging the enemy Waverider with the two troops remaining - submerge didn’t really affect the outcome at all.
I’d love to hear a case for this, but I’m going to have to say no.