I seem to recall that the merits of having a wet ignition were debated here years ago with perceived benefits to cooling and corrosion, especially with the failure prone SEMs. I think the biggest challenge will be to seal the case. It needs to breathe, and the electrical cables need to be there too.
The consensus to date with the older SEMs seems to be to have a good breather hole at the bottom, some put a split pin in there to keep it open, and use vaseline, or some hi temp grease on the bright steel bits to manage corrosion.
If you ride in damp environments, dry it out regularly. My theory was that with a sealed cover, other than the breather, when wading, if the air can't get out, the water can't get in, hence the breather at the bottom.
I was also able to source a billet cover for my 98 501 from Dale Lineaweaver when he was having a clean out some years ago which is a lot easier to seal than the original plastic cover.
In my dry environment, the drought has been going since 1996!, engine heat after water crossings seems to dry it out nicely and I rarely pull the cover, as when I do, its dry with no condensation. The current sparks stator, hopefully the last I need, works well too, and comes well recommended. Two original SEMs, and an SCR rewind, that didn't last very long at all, and now the sparks.
Steve