Lol, but it's there! The Mephits are each of them combinations of each element. A Dust Mephit is Earth and Air. Opposites, but still coexisting. Steam is not air, it's what happens when water gets so hot it basically ignites, except it doesn't ignite, it transforms into steam.
So you can impose your own system of opposite elements canceling each other out, but it's your own Homebrew. Two opposite things don't necessitate cancelation of each. SOMETHING happens when they hit each other. Hell, even Matter and Antimatter create something when they come into contact. A frick load of energy. They don't just negate each other and disappear without first making sure everyone knows they touched first.
When fire hits water, one of a few things happen. If they aren't equal, either the water turns to steam and the fire rages, or the fire is doused and the water continues. If they are equal, the fire is doused and the water becomes steam, thus neither continues.
In the instance of a fireball underwater, there's obviously more water than fire, so the fire turns an appropriate amount of water into steam, then is doused.
You can have fire work differently underwater without nerfing it needlessly. A Fireball with a range of touch is, in essence, a suicide spell, when there's literally no reason other than the DM can't get his head around it that it would be that way. Shortened radius of the blast and make the area lightly obscured from the bubbles for one round. Make Burning hands have half the range. Give fire different effects, sure. But negated altogether? That's what I can't get my head wrapped around.
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