Unfortunately, squash is a high percentage water, so it will always be watery when thawed. This is why most recipes for zucchini breads, muffins, cakes, etc, are very thick--to allow the excess water from the zucchini to thin the batter. Personally, when I freeze grated zucchini for breads, I always use its water in the recipe (I usually add powdered milk to it, for the liquid).
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