Frank any item stored in an uncontrolled environment such as a musty humid basement is prone to rotting the wood and midew effects. If you got the relative humidity under control (i'm not sure on the exact #'s) i don't see a problem with it, however you mentioned you had water coming in. Personally Frank, I would not sleep down there if it smelled funky from water. even if you tried to raise the waterbeds platform on say a frame of pressure treated wood, without the proper relative humidity conditions you will always have that musty smell. Make another post @ humidity #'s. people here will be more then happy to give you the specs.
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