Here is what this looks like on the air cleaner.
To answer the questions:
You must use a shorter filter. It comes out of a 90's Pontiac, I do not remember the number. It only took me a few minutes at the parts store to find the correct one on the last one I set up like this.
The top of the air cleaner is open. Yes, it will let water in. There are a lot of people out driving Fiero's with open air filter elemants. I do not sugest you do this if you are driving in a rain area. But if your car is mainly a nice day car, this is a cool conversion.
It will be louder and throatier. If you use K+N filter, even more so.