1) Last week a friend went for funeral service. He said that the grave was full of water. Is it allowed to bury a dead person in water?
2) The imam said that it is not allowed to see the face of a dead person after (Ghusl). Is this correct in light of Quran and Sunnah?

Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

Burying a dead person in a grave full of water while there is land without water for burial is indeed contradictory to Islamic jurisprudence.

It is reported in a Sahih Hadith the meaning of which is that the dead is harmed by what harms a living person. The dead should not be buried in water except in case of fear that the state of the corpse would change before the possibility of burying it in an appropriate land.

However, there is no harm to bury the dead in that place before its condition changes for a necessity because of the non-availability of an appropriate land to bury it. And if the dead is buried in that place the body should not be disinterred.

Ibn-Qudama said in Al-Mughni: "If a person is dead in a boat in the sea, Imam Ahmed said that the people in the boat should wait if they are expecting to find a place where to bury it. They should wait one day or two days if there is no fear that the corpse would decay. However, if they do not find a place then they should wash it, wrap it with a shroud, embalm it, perform prayer for the dead on it, and tie it to a heavy object, then throw it into the sea."

Besides, there is no harm to look at the face of the dead before the burial. It is reported in Sahih Bukhari and others that Abu Bakr Al Siddiq, may Allah be pleased with him, entered the Prophet's (Sallallahu Alaihi wa Sallam) house when he died, and the Prophet (Sallallahu Alaihi wa Sallam) was wrapped in a shroud. Abu Bakr unveiled his face, then he bent down to his face and kissed him, then he cried.

Moreover, it is reported in Sunan Abu Dawud that Aisha said: "I saw the Prophet (Sallallahu Alaihi wa Sallam) kissing Usman Ibn Madhun when he died, until I saw tears coming down his cheeks."

In Awn al Ma'bud Sharh Sunan Abu Dawud it is stated: "This is an evidence that it is permissible to kiss the dead as a sign of  glorification because it is not reported that one of the companions denied the act of Abu Bakr, and it became a consensus among the Muslim scholars".

Allah knows best.