The wet breathing while inverted is due to water leaking in the exhaust valve as air escapes during exhalation; maybe a little around the mouthpiece, but the majority is in the exhaust valve. When you're in normal diving position, that water drains back out the exhaust valve, but when you're inverted, the mouthpiece flange is the de facto drain. Wet breathing 2nd stages usually have leaky exhaust valves. This is the one design flaw of the pilot/Air1; addressed in the later D series by using a smaller concentric exhaust valve instead of the diaphragm itself as the exhaust valve. Side exhaust regulators will breath wet just like any others, but only if the diver is positioned so the exhaust valve is pointing up and the mouthpiece flange is pointing down. Because these two points are not on opposite planes in the reg's case, a diver has to be kind of between on his side and on his back, with his head down a little, to sort of point the exhaust valve up and mouthpiece down. Plus, there are almost certainly differences in how well some exhaust valves seal water out.
As far as the added breathing resistance when looking up, it has to do with the 2nd stage geometry and the difference in depth between the mouthpiece the diaphragm/lever interface. This is also why a regulator will free-flow with mouthpiece up and not while pointing down. It has nothing to do with the relative depths of the 1st and 2nd stages, unless carried to extremes, like with a 20 foot hose so that IP would be compensating for a completely different depth. With doublehose regs, the 12" or so hoses between the mouthpiece and cans are carrying ambient pressure air, not air at IP. Hence, depth differences between the mouthpiece and cans are MUCH more sensitive.