I now have a "prototype" unit to work with:
The circuit I'm attempting to use looks like:
With this setup (a plastic cup wrapped with foil--about a quart in size) R1 needs to be fairly large for the CPU to be able to measure the time it takes to charge the "tank capacitor" (currently I'm using 20M instead of 800k as listed on the diagram). This means that it is pretty sensitive to changes in capacitance: When the tank is full waving my hands near the tank does cause a change (strangely enough when the tank is empty no such affect is observed).
As an aside these little Arduino Mini's are really cool. Took me about 10 minutes to get it up and running with the example blinky code.