I do still think this card is underpowered (and I'm glad that my opinion from long ago is being vindicated :P).
Here is the discussion of this card from before it was added to the game, if you want to see some tables of how much damage this card does over time and that kind of thing.
I think a neat tweak would be to make the card only split after you've received damage. In mythology, the hydra grows more heads only after it's been attacked and had one of them chopped off. Maybe something like:
Attack 10N
N=#of hydra cards in game
If opponent reduced your tower/wall by at least 10 last round, then replace neighbouring cards with hydra.
Those numbers are just off the top of my head, and would probably need tweaking. I think this would make this card much more strategically interesting for both players. Right now it's basically just a durable card that takes several turns to reach its full damage potential.