Personally, I would have started an undersea setting simple.
1st:
They read and write on waterproof papyrus. They either purchase that from the "surface races" (e.g. humans) or they create it magically.
2nd:
They have great bubbles of air, the same way we, the mighty humans, have great pools of water. They do things in there, especially the ones they can not do in the water, but they can hold their breath out of the water only for a fixed number of hours (much like the Aquatic Elves of 3.5).
3rd:
The metal they use has all the properties of iron and steel but it does not rust in the water and it will be called Oreichalchos because why not.
4th:
They speak normally out of the water but use body language and telepathy while submerged.
Hope I was helpful...
EDIT: What about using magic waterproof pills instead of potions underwater?