This is what i was told by the middie -
Bub's head blocks off the exit, so that you're either only leaking a little bit, or after the first gush then leaking.
You don't lose it all at once - Think of how much fluid comes out when you birth the shoulders. Maybe i was just top full of fluid?
So say, bub isn't wholly engaged when your waters break, you might lose a huge gush, but then as bubs head blocks off everywhere, you only trickle?

LOL mind you that didnt answer your question re: how baby breathes, but the others have done that for you.