Why does a body submerged in a more conductive fluid still conduct current?
Electric eels tend to curl around the prey when hunting (and shock the predators when these make contact), so the shortest path for the discharge may well be though the prey's body rather than surrounding water.


Source: phys.org Credit: Kenneth Catania 

Additionally, electric eels are fresh water animals, so your assumption about water being more conductive doesn't really hold. Blood and lymph are better conductors thanks to the ions (mainly  Na\$^+\$ and Cl\$^-\$) present in them. In the end, a significant portion of the current will go through the body, which is enough to stun the prey or scare away predators.