Capacitive sensors are the best when you want to put something in the water. This is a very nice painted (for isolation) capacitive sensor : https://www.youtube.com/watch?v=C6PTT4_v9UoAt the moment I am using alternating sensing voltage with copper/nickel strips. That is not capacitive, but measuring the conductivity. I use three Arduino pins. Two for the alternating voltage, one to measure.What about these: http://www.dfrobot.com/index.php?route=product/product&product_id=690
There is another way of sensing water level you might want to check out - basically, you use a clear plastic rod with the end cut with two 45 degree bevels polished (looks like a wedge) and you have an led/opto sensor at the top. The LED sends light down the rod - when in air, the two surfaces reflect the light back up again while in water (or other liquid), the two faces don't reflect so there is no signal back again. I have not played with them, but I have seen the design before. That method does not have any conductors or anything in the liquid.