The problem has to do with two main issues. The first has to do with concentration and dilution (you learn this from doing lab work in a molecular biology lab or a book I suppose, whichever comes first. Hell, I guess you could probably get it off TV these days, lol.

), even in a small amount of water (say a drop of blood in a cup of water) the DNA will become incredibly diluted and require careful processing to re-concentrate it to potentially isolate and get a complete sample. The key is density control, water, blood contents, and DNA have different densities, so you take advantage of that to try to isolate your sample and hope for the best. It doesn't always work even when you do the methods correctly. :shrug:
The second more subtle and more critical issue, which comes from knowing a little basic biochem is that it's the
intra-DNA (i.e. bonding within)
Hydrogen bonding that becomes susceptible to breaking the intra-DNA bonds and forming the hydrogen bond with outside H20 and/or other Hydrogen containing compounds that leaves the double helix "broken" for lack of a better word and susceptible to unraveling at these corresponding points. I believe that this is what
Honord Sage was alluding to, albeit he didn't go into this detail, so I'm not sure but I'll give him the benefit of the doubt. :shrug:
As well, there's increased oxidative damage, from free electrons as water (H20) is constantly in flux, interchanging between H20 <==>OH- + H+ whereby free electrons will damage the DNA but that's trivial compared to the issue with Hydrogen bonding I mentioned above as it happens in all of us every day as we age.
Further, there are other issues, but again, it's really the Hydrogen bonding that's the issue as far as damage is concerned, and dilution of the sample when talking about DNA from blood in water. Before anyone asks/comments..., no I didn't have to look any of this up, it's part of by basic education based on the classes I chose to take in high school/college a while back. If I chose to be a writer, then I probably wouldn't know jack**** about this, lol. xd
Of course, none of this exists in the Narutoverse, which is why I put it in spoilers, so Kabuto didn't have to deal with these issues, and Kishi likely doesn't even know about these issues nor does the average reader if polled.