i would first start with the basics.when the water in fuel light comes on,the first thing you want to do is open the drain while the engine is running for a few seconds to drain off the water.
according to service books.haynes diesel tech book and the '93 diesel supplement,the fuel/water bowl should be drained every 5k miles or every 6 months whichever comes first or whenever the water in fuel light is displayed.
if your having issues with the oem metal bowl with sensor,you can just replace the whole works with a filter with built in drain and sensor.Wix 33617.
http://www.fleetfilter.com/mm5/merc...fleetfilter&Product_Code=33617&Category_Code=
you should first unhook the wire to the sensor and make sure the light goes out.if the light stays on,this means the wire is grounding out someplace,likely on the engine nearby.this is all the sensor does,is when the water fills up the bowl a bit,it will start grounding out this wire which starts to make your water light flicker,and when it fills up enough,makes it remain on until you drain it.
ideally,you'll pull over road side when it first starts to flicker but you don't have too.you can wait until your next stop if it's within a few miles,unless you got a real bad dose of water,then you should just keep pulling over to drain it off.
iv got a duralift/transicold electric fuel pump from Doug,you know with the stainless screen and bowl?
well i had let it go without cleaning it for a little while.just the other day i figured i'd clean it up since it's bolted to my alternator and i just had to get a reman alt (so i had it right off) anyway i had about 1" deep water in that.
