From the installation manual:

"Using a ⅜” (8 or 9 mm) ID “underwater rated” hose (not provided with the PSS), connect the hose to the hose barb fitting installed on the carbon and secure the hose with two (2) hose clamps.  Run the hose to a point in the boat at least two (2) feet above the waterline, making sure that the hose does not apply any load on the carbon part of the seal.  Keep the hose as close as possible to the centerline of the vessel so the top of the vent hose is never below the waterline, even if the boat heels.  Secure the hose in place with the necessary fittings that insure it will not pull free and drop.  This hose is now a venting hose that will help ensure that no air is trapped in the seal."

Yes, you can do this work with the boat in the water.  Only a small amount amount of water will come out of the vent during changeover (basically whatever makes it past the cutlass bearing and can squeeze by the 8mm vent opening).

I would think that air conditioning drain hose would work fine.  Coolant recovery hose would work too.  Technically, this is below waterline service and sticklers would say the hose should be polyester reinforced.  Very important that the hose is well secured up high and is not allowed to drop and produce a siphon.