It is a bit silly, but I can't think of an easy way to make it work properly in the game. You'd have to either make water wheels generate power based on how much water goes past them (instead of a set amount) and have the pumps pump slow enough so that the water from one only generates 10 energy in the wheel. Or make some kind of "power" level for water which gets set by the source of it (# of pumpsx10 or x100 for river) and gives that much to water wheels going over it. Both ways would still allow for systems with multiple wheels in a row, though, unless you made them slow the water down as it went through them. All this would probably slow down the game from all the extra calculations, and just make people skip them for wind power.
I don't really think it's enough of a problem to worry about fixing. Even without the waterwheel perpetual energy thing it's easy enough to get near limitless energy just with windmills. You can even build a stack of windmills generating power. Or even underground windmills with a tiny hole to the surface. As long as the central tile is exposed they work fine.
I could see a reduction in power generated by them, though. Maybe cut it down to 40. That way it's still worth building a water wheel for the power (2 windmills) but a perpetual energy machine won't produce enough power to pipe it across the fort and still have some leftover. One fort I made such a powerful generator that I had axles going all over the place powering magma pumps, water pumps, and my mill. It still had a bunch left over... It only had 8 water wheels.