That’s one of the prettiest ways to run IE waterwheels I’ve seen, Donzil. It’s also several pieces short of the micro-maxed wheel design my colleagues have been forcing us to use (and put in dirt boxes).
As for avoiding ugliness and spam, I think that could take a note from Reika’s waterwheel, which requires a waterfall instead. Make it detect the falls height (or even require a drain + vertical pipe - or extendable multiblock) for power scaling. If extendable, I’d go so far as to make the power also scale with fluid throughput [which would really like a fluid spiller, that voids on discharge into SeaWater or RiverWater]. This version representing the hydro turbine in damns rather than the medieval mill wheel.
Could also be done with a detect reservior lake + output river with height difference (and maybe even only work in a HILLS or extreme hills-type biome), with an exclusion area similar to the Lightning Rods [representing minimum catchment basin].