Had a 3hr drive in really bad rain at the weekend. Overall, very impressed with the car (M3/FSD/32.12.2) - to the point that I felt more comfortable driving with AP on than off. There were a few moments where it handed back to me - mostly when a vehicle cut in front and threw up a lot of spray - and functionality was restricted for a lot of of the trip, in particular blindspot detection.
Checking out the TeslaCam video shows exactly why HW3 will only be L4/5 in good conditions.
Left Cam - seriously affected by vibration and light blooming, no wonder blindspot / lane change was disabled
Main Cam is amazingly clear in comparision, but check out all those hot pixels on the "automotive grade" cam
When AP finally gave up, behaviour was predictable, in that AP suddenly deactivated due to lack of vision. But, AP (main cam) had better vision than I did, so all I could do was slow down and follow the tail lights of the car ahead until visibility improved, at which point AP quickly became available again. Am thinking that warning, slowing down and following tail lights for 5-10 seconds would be a better behaviour from AP (given the extra safety of the radar) whilst handing back a bit more gracefully.