item with on_use_on trigger cannot pass the event to a block

Partner Rank: 2

Verification build: 1.16.100.60 & all holiday builds
Regression build: new feature

Summary: item with on_use_on trigger cannot pass the event to a block

Impact: Greatly reduces the flexibility of on_use_on and forces us to use on_interact which causes blocks to always be right clickable even when nothing is in hand. This makes those blocks less user friendly to build with and fails other item use_on events. Makes holiday maps less good.

Repro:

1. download example packs
2. start the world
3. /setblock ~ ~ ~ design:disco_floor
4. /give @p design:wand
5. use the wand on the block

Observed result: the block does not change state despite it telling the block to "cycle_color"

Expected result: the block should run the event cycle_color

video attached ... jokes, it's a screenshot, but the block wouldnt change anyway so it being a video or a screenshot you'd be looking at the same thing except the chicken might be moving in the background.