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Does the damage from drowning translate to actual damage after recovering from drowning?
Example: PC1 with 10 CON fails check and begins drowning putting him at -1. Other PCs pull him out of the water and stabilize him.
Enemy ranger shoots PC1 for 9 damage. PC1 dies?
If he's at -1, then yes, he's at -1 and would die if he got shot for 9.
The damage doesn't magically go away if you stop drowning.
That's the RaW all right. I strongly feel it could be improved and will look at house-ruling it (possibly allowing a Heal check to restore a percentage of the hp the PC had before drowning set in), but you've quoted it correctly as it now stands.