How did water get there?

JDMopar said
They half *** spliced the trunk floor extensions/drop offs.

Yes they did!

JDMopar said
If you ever down the car for a proper restoration, you can replace the quarter and trunk floor extension with new AMD stuff to fix it properly.

That would be the plan but AMD doesn't make a 67 rear quarter (tail light bucket is diferent so it will have to remain a skin. I would remove the OEM 80s skin and then remove the rest of the sheet metal that was left from the old skin and the red in it right with a new trunk extension etc.