Tallin: Actually, not so much horror stories as miraculous repair stories. Had a netbook that died but was still under warranty. Sent it in and they said it had liquid damage and it would cost $300+ to repair, which was as much as the thing was worth. I told them just to send it back. Opened it up, swabbed it off with alcohol and voila! It's been running smoothly for over a year now. Two iPods and a cell phone went through the wash. Let them dry out and they still work great. The one iPod lost its backlight, but that may actually be due to me opening it up to see what it looked like inside...
One horror story, though, is from work. I am the unofficial/official tech support guy for a construction company. One of the site laptops was left on the floor of a site that flooded. They wanted me to see if I could fix it. Funny thing is, if the first response of the guys on site wasn't to turn it on to see if it still worked I might have been able to save it... well, at least I was able to salvage the RAM and hard drive...
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QC: Was it actually water damage? Dd it short? Would that potentially save me from having to spend about $200 on repairs?
Water damage isn't caused by the water, unless the water is corrosive (as in the Pepsi Challenge), but by power from the battery going through circuits it's not supposed to.
So if you catch a dunked portable device quickly, take the battery out, and dry it off well, it may come through undamaged. If you try to power it on wet, though, it's doomed.
Manufacturers are wise to this and hide moisture detectors inside. If you try to claim warranty service on a drowned device, they'll catch it and decline.