I snorkel mostly and as such have my head in the water the whole time, up to 8 hours at a time.
I wear a 7mm jacket with hood attached and have cut holes in the hood big enough for my ears to stick out.
Apart from the fact that I look pretty stupid before I get the headphones on I find that this works great.
I mostly wade with my face in the water, with a mask and snorkel obviously, and duck down and either fan the sand away or use a hand scoop.
Its possible to have your face in the water but your ears above and as such you hear the signals clearly.
You can still hear signals with your ears full of water but you'll lose about 50% of the volume.
If you try to hear through 7mm of neoprene as well then you will only hear the loudest of signals.
Also, without your ears sticking out, the headphones have nothing to "hang on to", and will slide off your head every chance they get.
I find cold water getting in your ears whenever you go under is only a minor discomfort and after a few dives is not noticed at all however it might bother some, everyones different.
This method clearly only works in calm water and is impossible in surf.
Hope this helps.
Lou.