With the change to wells a while ago, making them buildable anywhere, the dowsing rod seems like it's kind of purposeless currently.
My thought was that rather than being used to locate wells, its purpose could be to give you an idea of the quality of the water in an area. Currently, the only means that I'm aware of to do this is to build a well. In some areas, I've seen this cost upwards of 40 ropes. This seems an excessive cost for something that could just be a total wash.
A crafted dowsing rod could have a number of charges (3-5,) similar to a dose of rustroot, and would would allow you to use a new Adventure ability, Dowse. This would provide you with a readout of the quality of the water below you. With this change, I'd think that the price of a dowsing rod would need to be ticked upward slightly. Though, whether that would be more dreams or a new foragable or something, I'm not sure.