The aliens in Battle: Los Angeles use a health bar like MarioOne alien is shot up and falls into a pool. He then comes back up at full health - just like Mario 64, his breath bar is his health bar!
Wet-Dry World are the remains of a lost civilizationCloser inspection of the background skybox reveals that the city is submerged under water, this fits into the gameplay aspect of controlling the water levels of the world. Also notice how it's completely deserted, save some pond skaters and wind up toys. After all, a town that can be completely submerged in water isn't really habitable for land living creatures. However, the place isn't suited for aquatic creatures either, seeing as how it can just as easily be drained. This makes the pond skaters the only living beings of the world, because it is an ideal habitat for them. Perhaps this also accounts for their huge size? What we have is a level that is a deserted city of empty buildings, void of inhabitants, which can be flooded at will, complete with eerie music. When you put it like that it seems very likely that this was intentional.