Thoughts From the Homebirth Discussion List:
Connie's comments

My midwife, with 15 years experience, has attended hundreds of waterbirths. She has never had a problem associated with the water. She just scoops the baby up as soon as it is born, pops his or her little face up out of the water and let's mom take it from there. The baby does not have the urge to breathe until the umbilical cord or the baby itself is in air. The proven fact (in her practice anyway) is that water makes birth easier and faster with much less trauma to either baby or mom and greatly improves the baby's Apgar score.

My midwife also encourages waterbirths for breeches because the baby has a longer period of time between bum and feet coming out and the head being birthed. The baby makes no response to the water as s/he would when coming in contact with air.