This is an effective way to recover perfectly expanded bullets, to see what they would look like under maximum expansion conditions, but it's not really any good for practical ballistics testing for the following reasons:
1) you can't tell how far they penetrate, because you're shooting DOWNWARDS into a big barrel of water, and the bullets won't stop when they run out of energy--they sink to the bottom due to gravity,
2) Water doesn't have the same resistance to a projectile that tissue (or even ballistic gelatin) has, and it won't clog up a hollowpoint like cloth, tissue, or other semi-solid material will, so the expansion you get in water is unrealistic when compared to "real world" targets,
3) Water doesn't give you solid bits like a carcass for bullets to hit, bounce off of, or fragment from. The expanded bullet you recover will be pretty, perfectly symmetrical, and look good in pictures, but it won't reflect in any way the way a bullet deforms in a tissue-based target, and
4) Water doesn't leave a visible wound channel, and the hydrostatic shock is nearly impossible to see using the naked eye. Unless you have a high-speed camera to record it hitting the water, you have no idea how much hydrostatic shock you're getting, or how long, deep, and broad the wound channel is...
"Barrel tests" are a good starting place for ballistic testing, but they don't give you any real information regarding penetration, expansion, or energy transfer.