If this helps, comparing that previous version's css to the current, it appears that the 3.1 version isn't adding the watermark to the class field of the input box.
previous version:
class="wpcf7-form-control wpcf7-text wpcf7-validates-as-required wpcf7-use-title-as-watermark watermark"
current version:
class="wpcf7-form-control wpcf7-text wpcf7-validates-as-required"
And rolling back to that previous version of 3.1 has the watermarks working perfectly in IE again.