There is no point in UO history that I can remember items on boat decks being invisible if I was also on a boat. Even after this patch piracy was still big and the only safe point on a boat was that tile directly behind the mast on a large as it always was.
There are two possibilities about how this was handled on OSI. The first way that the rendering for items on boats could be handled was based on z-level, that is if you were on the same z-level as the boat deck and the same screen the items would render. This was in addition to the rendering done when the boat was moving if the z-level was not the same.
The other possibility, probably easier to implement, is that you were considered "on" the boat for the visibility check when you were within some number of tiles of that boat (similar to standing on the steps of a house).
To be honest it seemed like the latter was the case because I remember the channels near WBB to always have boats clogging it with items on them until after CUB phase 3 which introduced item decay on boats (Atlantic shard).
I have an image here from May '99 that shows an item on the deck of a boat.
The leftmost boat has a backpack while the capture was taken from the right boat.
