Because....
1) people didn't like letting go of the bar to adjust it
2) People wanted a gauge that was easy to see.
3) It got rid of a cable that was known to bind or rust internally.
4) You could still get water into it if you flip.
Let's face it... there is no perfect system... but if you check the boot once in a while, it's not a big deal. Also... I pop the cover of my 96's VTS every other ride, to make sure there isn't any water in it. It's not a big deal... and it will live forever if you are proactive in your maintenance. The VTS motor can run wet for a very long time. SO... if you check it every few rides, you will find the problem before it happens.
Personally, I think it shoud have been 100% manual. It would be reliable, and WAY cheaper to produce. BUT... this is exactly why JetSki's are no longer "Water Go-Karts". People wanted all the Gucci pimp crap. Now they are legit "Water Motorcycles" with an a$$ load of electronic junk.