Second stages get water in them all the time... that's not a problem. You don't want water getting into the HP side of the 1st stage, but I have had zero problems, and when doing a rebuild on my reg, and many others, I have seen no issues from the moisture where it it introduced in the system.
To answer a few other questions that were posed in this thread that I missed... I don't get headaches, but a lot of folks who have gotten them from me have said it instantly cured that... and Joe up here gets really bad heartburn after diving... didn't know what it was, and one day borrowed my gear with the bio filter and bingo... heartburn gone. Now he won't dive without one.
To address performance, the opening down the center of the bio filter tube is the same diameter as your reg hose - so there is no restriction. The air does not have to go through the sponge, it travels down the center of the tube, and some moisture is pulled in as the air passes by some hoses. It does not show any performance drop in my personal use, or on our test bench.
With the charcoal filter in place - it does have the air travel through the filter, and that is reported to cause a slight drop in performance for deep dives - but I don't use the charcoal filter. My goal is the moisture - so I took the charcoal filter out, and just use the sponge.
The only problem with this product, is people think it's a gimmick... and actually, it is the neatest after market product I've found that actually improves your health and comfort during a dive... but you may just have to try one to be a believer... as you see from the thread, everyone who has one loves it....