There is NO REASON in the world why your air drill wouldnt work under water. It would be a lot easier to just use this method rather than have a budy holding the drill above water. (Note: if you do use this method please take pictures because I would love to see it...should be a good laugh) not to mention the safety issues with trying to coordinate your timing..."ok drill, ouch STOP"!

The air drill will work just fine, you will have a little bit of oil but most likely it wouldnt be a problem...since you are aware of harbor freight pick up a few oil pads that you can set on top of the water and it will soak up whatever residule you have in no time at all. The bubbles will be a bit of a problem but if you have a snorkel mask that would solve that problem since the exaust will be above the drill bit.

I would suggest a left hand drill bit and keep in mind you must have a steady hand or the fixture will be ruined forever.

Let us know what you decide to do...