The question is: Would this work? Or am I missing a crucial step here. I want to avoid using HART Protocol as much as possible, I don't need the diagnostic data from it, simply the water level reading.
Why you need that specific sensor if you don't want to use it like it's designed?
The whole Hart protocol remines unclear to me. You can use multimeter to measure (test) the sensor output (if it's regular 4-20mA).
The HART communications protocol is only needed for configuration of the transmitter. It can also be used to read information from the transmitter too. If all you need is the level signal you can use the 4 - 20 mA signal. You don’t even need the converter board you linked unless 10 bit resolution is not accurate enough. You can use the A/D converter of the Mega and an appropriate resister to convert the current signal to a voltage.
The HART protocol communicates over the 4-20 mA signal by modulating the current by +/- 1 mA at a rate that the receiving device will filter out so as not to disrupt the primary signal. A HART tranciever will be able to detect the signal though.
When an instrument is configured to use only HART the instrument will output a constant current, usually 12 mA. This current is then modulated by the HART communication as described above.
In the industrial world you’ll find HART is only used for diagnostics / configuration so your approach is fine. Typically the 4-20mA signal is fed into a 250 ohm precision resistor to give a 1-5 V signal that is read by an A-D converter.
If you don’t want to use the Arduino’s A-D capability for whatever reason then that converter board you linked looks okay.
It might not be a bad idea to use it anyway as some 4-20mA devices drive slightly above 20mA on fault conditions which would exceed the Arduino’s 5V max.
