@BigBen2k .
Right. That will work (if properly done). It doesnt have to be IR emittor/receiver pair . You can use a good range of light sources (like a standard led) and a phototransistor or an LDR resistor. A good set of leds in a plexi reservoir would have that "extra pimp" look to the case.
However it must be taken in account exterior light , and EMI to the circuit.
Btw, the buoy might not be necessary in an opaq coolant. The refraction of light might be sufficient to measure two independent levels of voltage amplitude that can be translated as in "in water" and "not in water"
.