Water: Think of what it means in literature. It is a cleansing. In the Japanese creation myth, after Izanami died and shut herself in the cave, Izanagi--having seen his dead wife/sister's body--went to a stream and bathed himself, in a spiritual cleansing, because contact w/ the dead is considered a "ritual fault."
You can read about it in detail
here, in my totally awesome thread about water.
Water--being submerged in water, or in rain, &c.--implies a character's "cleansing," or baptism. James, on the other hand, never experiences an actual submergence until the end of his story, when he absolves himself of his sins. The fact that there's an exorbitant amount of water in Silent Hill 2, yet James is never doused in it, suggests that he cannot be "purified" until he takes his final plunge, that he cannot be absolved of his sins until he understands
why he needs to be.
And so, when he learns the truth in Lakeview Hotel, it is flooded, and dripping, and allowing him to finally be cleansed.