1) Yes, it is waterproof. I keep the one in my keezer in a jar of water to buffer the temp readings.
2) When used in a fermenter, you want to measure the temp of the beer, not the air. Tape it directly to the side of the bucket/carboy, cover it with bubble wrap or something to insulate it and you'll be good.
Good Temp Control -----> Happy Yeast ------> Tasty Brew