Solution: The Ugly Duckling

Answer: SADEIDER

Written by Ethan (circling idea from Vinhan)

The flavor text hints that words we're trying to find can be found "circling" water, that is, words are circling around a central letter. "Waterfowl" also clues in the types of words we are trying to find. Once you find a couple of words, one may notice that each come in 3x3 blocks that are all adjacent transversely or diagonally to each other, which should aid in finding all the rest of the blocks. Further, each word starts at the top middle square of the 3x3, indicating starting position isn't important. The X represents an empty space (as some bird names are 7 letters)

Taking the central letter of all of the blocks (the 'water') and reading them left to right gives "ABC TAXON SEMAPHORE," hinting at using alphabetization, taxonomy, and semaphores to extract the answer.

Looking at the taxonomy of the birds, you will find that pairs of birds share the same genus. Each pair can be treated as a semaphore signal, with the center point being 'ANATIDAE,' the biological family name for waterfowl. Sorting the genuses alphabetically and extracting the semaphore signals gives "SAD EIDER".

Author’s Notes

Many teams had trouble parsing and understanding the cluephrase; some saw it as ABC TAX ON SEMAPHORE and some didn't connect TAXON -> TAXONOMY. We debated making it GENUS instead of TAXON, but settled with TAXON as we didn't want to give away too much of the puzzle.

The answer for this puzzle definitely isn't the best either. It makes some logical sense in context of the puzzle/book (an EIDER is a waterfowl, who is sad because they are bullied) but it definitely may have threw some teams off and caused them hesitate when calling it in.