Without going into any specifics, a neon sand extruding method has been found. TheRealM18 can confirm on this, but only just what he knows - further testing has found only Neon Sand, rather than any of its varieties, can be created.

(also confirmed to not be a sponge issue - was found on Futurepack Lives v. 1.0.4.)

yeah we have a method to creat neon sand. If it involves liquids then it is intended and not a bug.