Air is easier to suck in than water, and like many things in pysics, this also takes the path of least resistance. So, it shouldn't suck up water unless it's unable to get an adequate supply of air. Still, I wouldn't push your luck.

I believe how a bypass valve works is that it just acts as a small auxillery filter in the engine bay. If the regular filter happens to get so wet that it can't supply enough air, it would normally just start sucking up water. But, a bypass valve allows it access to the air in the engine bay, which it can suck in with less resistance than trying to suck water through the filter. The downside to a bypass valve is that even if the CAI filter is completely dry, it can still be easier for the engine to take some of it's air from the engine bay. It's like trying to drink through a straw with a hole in it (above the level of the drink); you get a mix of your drink and air coming in from the hole.