The substance’s tendency to react with water in step 3 would be placed where on the venn diagram?

Answer is: step 3 would be placed C.

This is example of chemical change (chemical reaction), because new substances are formed (gas is emitted), the atoms are rearranged.

Physical property can be observed and measured without any changes in molecular composition. The same substance is present before and after the psysical change, just with different form or state of matter.

Chemical reaction: powder + water → new substance + gas.

the old alchemists made significant contributions to science even though there starting premises were off a bit. their conclusions after failure would steer them into better directions for investigation. science is no more than close observation and the initial mistakes result in rethinking and retrying experiments.