The felt/rubber seal on the steering knuckle does a fine job keeping water out, provided the seal's in reasonable shape and the knuckle's properly full of grease. Water may contaminate the film of grease on the spherical axle housing tip a bit under sustained submersion and lots of steering input, but the grease is constantly flowing out through these seals and that grease will be renewed. Even significant water intrusion wouldn't likely get up and into the birf itself, but of course may contaminate the bottom of the knuckle cavity and the lower steering knuckle bearing therein (trunion).
The axle vent is for the diff housing and all the way out to the axle seal, but does not vent the birf chamber/knuckle. The birf/knuckle has no vent and this is one of the reasons it should be kept 2/3 full or more - air volume will expand and contract dramatically with temperature changes. So, a lot of air in this area means when you go wading the knuckle could cool and create a vacuum that would actually suck in some water. The diff needs a vent because more than 75% of its volume must be air by design and it must have a way to account for this dramatic temp change.
So. Keep the birf maintained, the seals fresh and the birf full of grease and you won't suffer water intrusion into the birfield area.
