This might be a month too late but… why not fuse? If there is no over current protection in your system, you should throw one in there before you frag a battery and then you are in for a good fire…
The pulse rating of the ESC and the continuous current are different things. ESC vendors might quote pulse, but continuous will be way less. My esc will pulse 800A for <100us, but can only do 180A continuous. If you have a fuse for 2kW from 12S it will be ~40A, add +50%, so you get 60~70A. I’m fusing at 70A, but will run up to 100A as I unlock more power with development.
A fresh topped up set of 12S cells can be lethal because of pulse capability. To protect the fuse and batteries you need to make sure there is adequate capacitor banking on the esc side of the fuse. Current will ‘ripple’ from these banks, as it should, so that your battery current is nice and stable, and your fuse doesn’t die prematurely. This is much healthier for your cells, and can explain why they aren’t lasting as long as you’d like. Current ripple is bad. Big cap banks make a bit of a spark when you plug in, but they are lesser of two evils. You need big big caps and many, because each has a piddly current ripple - you want about 20A ripple capability in your bank, actual capacitance value matters far less than ripple rating.
When a fault happens, consider a hard short circuit on your esc output, will cause a massive pulse that won’t stop. It becomes the ‘steady state’ that drains the current smoothing banks, then they will replenish heavily from the battery and the fuse will blow. Sizing fuse to be small enough, so that the fuse blows before your esc catches fire is the trick. Preserving the esc, requires finding sweet spot between enough ripple capacity and so much energy in them that their discharge damages esc before fuse blows. If you don’t save it, at the very least you’ll stop a fire.
When wire burns it’ll desolder itself, melts insulation or just burn until gone and the fets would likely remain intact. Also, water isn’t that conductive, it’s more a nuisance. IMO your esc is driving at low frequency, no current limit, heavy demand looks like a short circuit essentially, tyour esc pwm keeps rising, he motor inductance saturates quickly, current shoots through, you get a busted low side from over current, then soon after a busted high side, crowbar because these fets always fail short circuit, heating in the pcb and packages, fire, magic smoke. This happened to me three times until I figured it out.
12AWG is easy to work with. 8AWG is a heavy bitch that is hard to terminate. 10AWG is a nice balance. None of them will give you a heating problem until you have a hard short circuit somewhere else.