I'm afraid I'm a bit in the dark on this one. This is the first time I've ever heard of this! Where exactly in Zora's Domain would this have been placed?
Also, when people are mentioning the sword beam, are you referring to the full-hearts shot the sword could perform in the 2-D games? If so, that would have been really great to have return, but I could see how it might be a problem with targeting it in a 3-D environment. It might have proved fairly useless to direct at foes, in which case I can see why it, and therefore the fountain (if it was to give you the beam) was removed.
At any rate, I always enjoy seeing these little bits and pieces of games that never made the cut. Although sometimes they do prove disappointing that they were indeed left out...