What I don't understand is why there aren't strict rules in place by the insurance companies (and DOT) which clearly outline a flooded car so it NEVER enters the market with a clean title ever again. These cars should be used for PARTS ONLY. You just don't know what damage was caused to the electrics, etc.
Imagine getting into an accident and say the airbag never deployed cause it was damaged by water when the car was covered to the roof...
Having said that, I currently own a 2004 Mazda RX-8 with a flood title. Not sure how bad the water line was but the entire interior is original, down to the carpet, so I guess it was salvageable. The car is other MINT and in perfect condition inside and out.
It's my 3am 10 min drive to work car where it sits for two days while I'm out of town and then I drive it back home 10 mins at midnight when I come back. Perfect for my needs @ $1,300 I paid for it. I definitely wouldn't drive this car beyond that. It's not a safe vehicle to me, although EVERYTHING WORKS except the electric power steering... but these have been known to fail, so who knows if it's from the water damage or not.
I guess it boils down to a case by case situation. Some pics of these cars stranded in water are simple fixes. Engine probably hydrolocked and the car stalled in the water. No other damage to report. Replace the engine (or fix it) and the car is good to go, even with a flooded title. You can save THOUSANDS.