Updated the level!
Short version: SA-1 solves all problems in the end.
Long Version: I fixed the pirahna plant issues. That was the only easy part though.
For those of you who weren't aware, it turns out Nintendo never coded underwater interactions for Layer 2... at all. So as much as I wanted to use some scrolling Layer 2 gimmick, it just wasn't going to work out due to the sudden loss of water physics upon standing on a Layer 2 object. And while someone could probably utilize those quirks, they're not part of my design philosophy here.
At the same time, I still wanted to keep the translucent effect--which only applied to the Layer 2 in this level mode. And then I realized that by placing Layer 1 objects over the Layer 2, the Layer 1 interaction takes priority, remove any weird quirks like "sticking" to the ground when carrying sprites, or dropping super fast off a ledge. So I came up with the clever idea of sticking an invisible layer of ground under everything!
Then I came across another problem; sprite interaction. Initially, I had set the level to "enable buoyancy but disable all sprite interaction with Layer 2". Ugh, you fix one thing and you find another problem.
So I had two options. Either A: I apply the same invisible Layer 1 to every wall and ceiling in my level or B: Insert the SA-1 patch into a new ROM and migrate everything over. Obviously, the latter was a more painless procedure to addressing the slowdown without having to
Still, it sucks that the Layer 2 interaction underwater is so darned quirky: I was hoping to revise the second half with a scrolling Layer 2 gimmick, but I refuse to implement something that could throw off the player's physics for no good reason. Guess it's back to the drawing board for now: hopefully I'll have come up with something within the ten days remaining for the contest.