"Lui ha acqua."
True, adjacent vowels are often elided, and they can be difficult to distinguish in "normal" speech, but I don't think this is the whole problem with duolingo. I haven't been using it very long, but so far my biggest problem is the sound quality. It is often "muddy" and indistinct, sometimes difficult to understand even when played slow. I've studied Italian before, and my ear is not bad. Your point is perfectly well-taken, but I still think there is a technical problem. The program is in BETA, and I assume these comments are being read. We'll see if it improves.
Sound quality is even worse in the Spanish course! But perhaps I believe that to be the case because I have had the opportunity to talk with and learn from (for a few short weeks) a native Italian. No such experience with Spanish.
I didn't find the sound quality in Spanish to be all that bad, and in German it's surprisingly good. For me, Italian is the worst of the ones that I've tried, but that might be because it's the only one I don't speak yet.
Clicking the slower button really helps sounding out the different words.
My understanding is that it is NEVER pronounced in an Italian word. Of course, Italians sensitive to language might try to pronounce it in a non-Italian word such as the name "Harry," but don't count on it. One is much more likely to hear even well-spoken Italians say "Arry," just as they would probably say "ave" for "have." It is a big problem for Italians learning English (or any language that has this sound). The letter exists, of course, and it has a name, "acca," but it is never "sounded."