The problem you are experiencing is ventilation rather than cavitation. The propeller is sucking air down from the surface when at very low depth. Once you get below a few inches the ventilation problem should disappear. There isn't a lot you can do to prevent this, other than keep the revs down when near the surface. It is a common problem with spindle sterned boats. Subs which were designed to spend the majority of their time on the surface tended to have hulls shapes with the props mounted underneath the hull (e.g. submarines of WWII) which prevents ventilation, but is less efficient when submerged.
There are two versions of propulsor fitted to the OTW Vanguards.
The earlier version had a Prop Shop propulsor that looks like this-

The later boats have a propulsor that was made by Dave Merriman, and is now cast by Prop Shop for OTW. This has a more blades, but the blades are smaller in cross-section and lower pitched.
Either should provide adequate thrust if well matched to a motor's RPM, but I think it's fair to say in model form conventional props tend to work a lot better. The Vanguard will never come close to a Lafayette in agility. The boat has a high aspect ratio, and the fixed shroud tends to fight the rudder, a swivelling shroud would give the boat very good turning capability, but it isn't scale.