I've been running w/out the air bypass valve for about a year now with no problem and, yes, lots of rain.
read this and tell me the need for it
http://www.aempower.com/by_pass.htm
The only reason to get one is if your car is lowered so much that it no longer has wheel wells and the filter is constantly exposed to moisture. If you installed it yourself, you'd see the position that it is in and it is a very safe place.
When in doubt, shut the motor off and pull off the road. If its raining that hard, you shouldn't be driving.
you will lose 3-4hp with the bypass valve installed.
There's another thread called "how much hp loss" in the forum that talks about this too