The wet breathing is probably from some obstruction between the diaphragm and exhaust valve; on this reg the exhaust valve mounts directly on the diaphragm via a had plastic flange that is part of the diaphragm. I've had a few breathe a little wet and the final solution was to replace either the exhaust valve, diaphragm, or both. The sudden freeflow might have been from a problem with the lever hanging up on the clip that DA referenced, or might have been just a freeflow that turned violent due to excessive venturi assist. In any event, there's a small plastic sleeve just inside the mouthpiece flange that you can adjust to control the venturi. The older air1s (mine, anyhow) and converted pilots don't have this sleeve, and once they get flowing, it can be pretty dramatic. So, push that sleeve so that it covers about half of the opening to the mouthpiece and see if that helps. You need a small screwdriver or something similar to do it.
The one thing that might account for both would be a problem with the hard plastic flange and mounting clip that holds together the diaphragm/exhaust valve and attaches the lever, so that's where I would start looking if it were mine. The orientation of the lever and and diaphragm, as DA mentioned, is really important.