Water separators are to protect the injection system not the engine.The steam will not harm the engine unless you inject far too much water in which case you will quench the flame front and loose power long before you blow the head gasket.Pickup racers with the 5.9L Cummins engines are injecting up to 1 gallon of water in a 1/4mile race.
I put it pre-turbo because I couldn't afford a high pressure pump.
You won't get more than 2whp. There are far better $/hp options available for a non-turbo engine, a turbo for example.