The kraken does not block the staircase on a sloop, or at least not effectively. It may block sections of the deck from it, however.
For larger ships, the staircase wrap is fine. With the whole crew below deck on a brigantine or galleon, you all have the ability to repair every hole the moment it appears and take 3-4 full buckets from the hull - enough to fill an entire deck, nearly. In that situation, you should end up with next to no water and no holes by the time it unwraps itself. This is why my guides recommend two players stay above deck on cannons or sails (depending on intention), and to alternate reloads, even if that means going below with half of an inventory's worth of cannonballs still on you.