P0302: CYLINDER 2 MISFIRE DETECTED

My wife noticed that the car was running not well in the mornings or when the car was standing still for a longer period off time. Today, I left this morning, dropping off my son at school. Just down the street is a little bridge. Water was flowing over it from the rain storm from yesterday night. I thought the level was not high enough for me not to drive through it. Well, I was wrong. The car died right after I passed the bridge. And didn't want to start anymore either. After trying several times, it finally started. The car made a huge ticking sound. Just like the lifters ticking sound but 10 x worse. I also got 1 trouble code, P0302. It means cylinder 2 misfire detected. I checked and replaced the spark plugs with new NGK's. I looked inside the spark plug holes and noticed that cylinder 2 is the only one with a wet piston top. I can freely turn over the crank with a ratchet (with the usual resistance from the cams). I called the dealership and explained everything to them. They have no clue what it can be, until I drop off the car at their shop. But I don't want to drive the car over there. Until I know what's wrong and it can't hurt the engine. They also told me that scion/toyota doesn't cover anything that's damaged by water. So, that means I need to find out what's wrong and what to do. That's where this thread comes in. So, any suggestions.
Sorry for the long story, but I want to be as clear on this as possible. The mods on my car are listed in my profile, if needed to know.

Thanks for the help.

Sven