I'll jump in here, Lance.
First let me declare an interest - as I designed the Magic Filter. But I will try and give you an honest answer. I get asked this question a lot and it does not have a straight answer.
The difference between not using a filter (underwater mode or manual white balance without a filter) and using a filter is that the filter will alter the balance of light before it reaches the sensor. Underwater mode is just an in camera adjustment to the look of the image. So in theory a filter should always be better as the colour is corrected both before it is collected by the sensor and then also by the in camera processing.
However, photography is not just about technical perfection. It is about images and in many cases underwater mode or MWB without filter can work really well. It will get you exactly the shot you wanted.
Part of the problem in answering this question is that not all "underwater modes" are equally good. Some that I have used are excellent - others are not. My advice to people is usually to do a few dives using the underwater mode. If you are happy with the results then you don't need to buy a filter. If they are not coming out as you had hoped then you should try the filter.
I have also found that the underwater mode can work well with the filter. Particularly deeper - extending the range of available light photography.
I hope that this helps,
Alex