Beat 1/2 cup butter at medium speed with an electric mixer until creamy; gradually add 1 1/4 cups sugar, beating well. Add eggs, one at a time, beating after each addition.
Combine 2 cups flour, baking powder, and salt; stir well. Combine milk and water; stir well. Add flour mixture to butter mixture alternately with milk mixture, beginning and ending with flour mixture. Mix at low speed after each addition until blended. Gently stir in blueberries and cream cheese. Pour batter into a greased 9-inch square pan.
Combine 1/2 cup flour and remaining 3 ingredients; stir well with a fork. Sprinkle mixture over batter. Bake at 375 degrees for 50 minutes or until golden. Serve warm or at room temperature.