I also have that DVD, but there is a later one called Easy Freestyle which represents their latest thoughts. I have both of them and drill from both of them right now as there are aspects of both that I think works for me.
In the DVD that you mention, Ian is one who of two who sink. But, Joe showed how to avoid that by making transitions crisp. When I do review the underswitch drills and make my transitions crisp, I don't look up at an inch or so of water.
I, too, continue to breath in the way that you mentioned to be consistent in the water -- in through the mouth, out through the nose.