Artoomis said:
3. Disallow "fly" all together with underwater movement. This seems to be the least desirable and most unreasonable approach.
As far as I am concerned, the lack of specific rules for how to use fly underwater is a hole in the rules. I do not think the rules were meant to exclude this, and as written, do not exclude this.
In my view, the fact that fly "can" be used for movement through the air is most certainly not the same as fly can be used "only" for movement thorugh the air.
The latter reading has all kinds of problems, not just prohibiting underwater flight. It would prevent flying through pure oxygen, for example, because that's not "air." Or poisionous gas, or a vacuum, etc., etc.
I believe that the lack of rules on flying underwater was specifically meant to exclude flying underwater. That is why they specify flying is in air and and swimming is in water. There are is one notable exception to this (walking in water), but an exception is just that: an exception, not the rule. The Plane of Water arguement holds no bearing on the rules in the Manterial plane, except to argue that it is reasonable (which I will touch on later).
I find the fact that you consider the word "air" to exclude any gas that is not a specific mixture of air, nitrogen, and oxygen to be confusing. Air is not a defined game term, and your own signature states that the rules are not scientifically precise documents. I think that ruling that different types of gas qualify as air is completely reasonable. However, ruling that air is the same as water does not seem reasonable.
Even if you are to assume that the "in the air" description of flight does not prohibit flying underwater, the strongest arguement that you really have is that it is not specifically prohibited. While this may be a valid point, I think it is important to point out that this is not the same as saying it is supported by the rules. What you are claiming is quite the opposite: that no standpoint is supported by the rules. Best case senario, you are arguing that arbitrary desicions and/or house rules are the only way to describe how underwater flying works.
As for flying underwater being "desirable and reasonable", I also have to disagree. Desirable for a powergamer, maybe, but certainly not for the GM who would have to go through the process of figuring out how the process is supposed to work. As for reasonable, I disagree as well. There are a whole slew of problems that arise from ruling that flight can occur underwater. For example...
How does relative weight and bouyancy work?
How does a Raptorans "glide" ablity work underwater?
Are other abilities that use air usable in water as well? For example, the Wind Wall spell, or an Air Elemental's Whirlwind?
Can a flying creature still choose to make a Dive attack underwater?
It seems reasonable that hovering would be easier underwater than in air, but using the Hampered movement rules makes it more difficult. How is this accounted for?
This is just a short list of the can of worms that your interpretation opens up. And all can be completely solved by simply stating that if something could fly underwater, it would have a swim speed as well (which is also the most realistic answer).