While this is an older reference than I've seen before, the more common variation dates back at least as far as the German work Reinhart Fuchs in the 1100s, with no apparent connection to the Arabic variation. As scriver states, the traditional blood brotherhood and similar rites were "make us family where we were not before", indicating that family ties were never ranked below other ties as the modern "water of the womb" quote implies.
I'm aware of the
Reinhart Fuchs quote, but I have trouble crediting that as the origin when it's not saying or meaning the same thing. The translation of the quote is "I also hear it said, kin-blood is not spoiled by water," where the water in question is literal seawater. There's no comparison of either viscosity or the relative strength of friendships and blood relationships implied, so if that's the origin, we've got to somehow get from "we still care about family even when we're oceans apart" to "family matter more than friends" while also changing the literal text of the proverb.
The Arabic origin, on the other hand, is referring to Raḍāʿ as opposed to blood covenants and explicitly contrasting the two -- which makes sense. Raḍāʿ is the term for an idea predating Islam that breastfeeding produces a form of consanguinity, and under Islamic jurisprudence it prevents marriages in the same way. It also had some of the same political implications we might recognize from arranged marriage, and in much the same way, the relationship is established before the participants have any say in it. "Blood is thicker than milk," then, would seem to be saying that people care more about the people with whom they choose to associate than those with whom they are bound under this sort of arranged consanguinity -- and that makes sense as a description of human behavior if not as a prescriptive ranking of the importance of different relationships. I'd probably care more about my friends than my arranged milk siblings too, if I had any. Moreover, it's closer to the modern saying both literally and in meaning.
EDIT: I also can't find any reference to the "friends vs family" meaning earlier than the 1600s, and the "Qamus" my souce upthread refers to as the source of the Arabic version is probably the Al-Qāmūs al-Muḥīṭ, an Arabic dictionary compiled from even older works by al-Fayrūzābādī (1329–1414.)