Might work, might not, it's going to be kind of a suck it and see situation. It's entirely possible that Windows will blue screen when you try and boot it because of differences in hardware. It would also be a bit of a legal gray area even if it does work. OEM volume licenses are licensed specifically for the hardware that ships with the unit, nothing else. So even if you get past the Windows blue screen issue, don't be surprised if you then can't get it to activate.
On a purely technical standpoint, the odds are low that if the HDD from the waterlogged laptop is damaged it will do any harm to the new laptop. It's possible, depending on how it was damaged specifically, but I'd put the odds in the high 90th percentile that the worst that would happen is it just doesn't work if the drive is damaged.
I'd be prepared with some kind of contingency plan if things don't work out like you hope.
I recently broke my hp m6-1225dx notebook by spilling some water on it. I plan on buying a refurbished version of an earlier model (hp m6-1045dx) because it's cheaper. My plan is to swap the hard drive from the broken laptop into the refurbished one so I wont have to repurchase things like Word. The hard drive appears undamaged from the spill. My question is whether the hard drive is compatible with the older model (i cant find any difference between the two models other than one runs Windows 8 and the older Windows 7). Also if the hard drive is damaged from the water will it damage the refurbished laptop?