Happy John is spot on the money. If you're pumping air into the car from outside, it has to go somewhere or you'll need a decompression chamber after every trip.
General rule of thumb: on "external air", your cabin air vents are drawing air from outside the vehicle. On "internal air", your cabin vents are drawing about 10% of the air from outside, the rest is recycled. That's essential, to prevent carbon dioxide build-up.
Want to test it? Go to inside-only air with the windows up and stop behind a Hyundai Excel. You'll soon smell the burning oil.
Water ingress - unlikely due to two things. First there's a membrane over it preventing it, although it won't be perfect - if you stop window-deep in a river, you'll probably see some water come in.
Second, when you're traversing water that deep - you don't ever bloody stop!