There is a little plastic airbox in the fender that you won't see unless the whole airbox is removed, called a 'snorkus'. People have removed it to free up some power with minimal noticeable difference.

Your intake is always pulling in a very large volume of air, even idling. If water gets too close or covers the opening that air is being drawn, it WILL be sucked in and stall/ flood your engine. Aftermarket "cold air intakes" where the filter sits it the fender have an even greater chance of pulling in water/ moisture than stock since they are closer to the ground AND more exposed. The snorkus actually protects the stock air box from splashing water better than most people think.

A filter in the engine bay ("short ram") is the best clearance you can get without serious modification. With a nice, functional heat shield on the filter (a search will show many custom heat sheilds) you will still have some nice gains. This is what I did. Just find out what the most effective way to keep the engine's heat off the filter/ flow area for your setup and you'll be suprised. A good sheild will also keep everything away from any splashing water/ muck and your water clearance will be as high as you can mount the entrance to the intake...maybe the roof if you want to do something real cool.