The sensor is on the driver's side frame rail, as part of the fuel filter assembly.

I had a follow-up post..
Update on Water-in-Fuel indicator light - Ford Truck Enthusiasts Forums

which shows how I cleaned it out, and it now works fine. Bottom line is that you need to get a VERY large Q-tip (pic in the link), and get in there and clean out all the junk. It may take a couple of times to get it all cleaned out.

Rgds,
TX