What is being modified in a phrase like rock hard or water resistant?

The answer is that the first word in the compound adjective is sometimes a modifier, sometimes a complement, and sometimes changes the meaning completely. There is a brief discussion of this in the Cambridge Grammar of the English Language p1656-1657:

Noun + adjective compounds

The majority of compounds with an adjective as second component have a noun as the first. In general, there is no contrast here between a compound and a syntactic construction since adjectives take only a highly restricted type of NP as pre-head dependent (cf. Ch. 6, §3.2): the syntactic dependents of adjectives are generally pre-head adverbs or post-head PPs and clauses. Many noun + adjective compounds involve a high degree of lexicalisation, as in:

[25] colour-fast, foot-loose, headstrong, threadbare, top-heavy

Although there is a more or less obvious connection between the meaning of the whole and that of the adjective head, none of these satisfy the test for hyponymy. He is headstrong, for example, does not entail He is strong, and something can be top-heavy even though it is as a whole relatively light. We will not attempt a comprehensive review of the patterns to be found, but will illustrate a selection of the more productive ones.

Comparative/intensifying [26]

i

bone-dry, crystal-clear, dirt-cheap, dog-tired, feather-light, ice-cold, paper-thin, razor-sharp, rock-hard, stone-deaf

ii

bottle-green, brick-red, jet-black, snow-white, steel-blue

Here the noun indicates a standard of comparison: “dry as a bone”, “clear as crystal”, etc. Very often, as in [i], the effect is to intensify: bone-dry means “extremely/completely dry”, and so on. A special case of the comparative type is that of colour adjectives, as in [ii]; jet-black and snow-white are intensifying, but the others simply specify a particular shade of the colour. Compounds of this type are clearly hyponymic: if you are dog-tired, then necessarily you are tired, and so on.

Measure terms

[27]

ankle-deep, shoulder-high, skin-deep, state-wide, week-long

This is a productive pattern, with the noun indicating extent. Wide here has to do with area rather than the one-dimensional measure denoted by wide on its own, and skin-deep “superficial” is a further example of lexicalisation. Compounds formed on this pattern are non-hyponymic: The water was ankle-deep, for example, does not entail The water was deep. We noted earlier that there may be a variety of reasons why a compound might fail the hyponymy test: in the present case it is due to the fact that the adjectives are gradable ones that can apply either to the scale generally (How deep is the water?) or to an area of the scale greater than some relevant norm (The water is deep). The compound involves the first use, whereas the adjectives are generally interpreted in the second way when standing alone.

Incorporated complement/modifier

[28]

accident-prone, burglar-proof, camera-shy, carsick, cholesterol-free

class-conscious, girl-crazy, oil-rich, power-mad, praiseworthy

snow-blind, tax-free, travel-weary, user-friendly, watertight

These are comparable to syntactic constructions where the adjective has a following PP as dependent, complement, or modifier - compare prone to accidents, proof against burglars, crazy about girls, rich in oil, etc. Free (both in the sense “not having to pay”, as in tax-free, and in the sense “not containing”, as in cholesterol- free) is particularly productive. Some adjectives, such as crazy, free, mad, rich, weary, worthy, occur readily both in compounds and in syntactic constructions, while others, such as proof and tight, prefer or require the compound form. Others again take syntactic complements but hardly form compounds: fond of animals, keen on sport, eager for revenge (compare *animal-fond, *sport-keen/*sports-keen, *revenge-eager). Where the noun corresponds to a syntactic complement, the compounds are generally not hyponymic: tax-free goods aren’t (necessarily) free, nor is a user-friendly computer manual a friendly one. With prone and proof the issue does not in fact arise since they cannot stand alone without complements - and indeed the same applies to free and conscious in the senses they have in cholesterol-free and class-conscious.

Self compounds

[29]

self-confident, self-concious, self-evident, self-important, self-righteous

There are a great many adjectives with self as the first component; many belong in the verb-centred category (self-denying, self-declared), but there are a considerable number which are adjective-centred, like those in [29]. A high proportion apply to humans (but cf. self-evident, self-contradictory). A few are hyponymic (self-confident, self-contradictory), while others are clearly not (self-important, self-righteous).

The above are sometimes found without hyphens.

Indeed, a review of accident records for major airline equipment in the past few years seem to indicate that GE and Airbus are no more accident prone than others, such as main competitor engine-maker Pratt & Whitney. (San Francisco Chronicle; 2001-11-13)

The week long operation ended on Thursday. ICE officers in L.A. reportedly just finished a similar operation. (Los Angeles Times; 2019-07-13)

The same spectra of Ka and Fk were seen in the work of Koren (1999), who pointed out that this brick red dye (Ka), which was extracted from textiles, is found only in an oak-kermes coccoid scale species and is not present in any plant or cochineal insect. (ACAD: Bioscience; Dec2005, Vol. 55 Issue 12)

He didn't feel called on to mention the extra vote for himself the widow would bring into the Beat. Nor his anxiety that Woodrow, being too foot loose and fancy free, might light out for the bottom and never put a vote in a ballot box. (FIC: The Mississippi Quarterly Fall 2001; The Best Laid Plans; John Faulkner)

etc.

Phrases like "rock-hard" and "water-resistant" are a special subclass of idioms in English (and other Germanic languages: cf. German "wasserdicht", "feuerfest"). Sometimes they are single words ("fireproof"). They are a strange kind of idiom because their meaning is not metaphorical (as with most idioms) but is not entirely determinable from merely the sum of their parts either (as with phrases that aren't idioms). "Water-resistant" is a compound adjective and, as an adjective, modifies nouns. It represents a kind of "shorthand" for "resistant to water", i.e. the shoes are resistant (adjective) and they are resistant "to water" (where "to water" would, grammatically speaking, be an adverb describing how, or in what way, something is resistant).

Because these types of phrases (like "resistant to water" or "proof(ed) against fire") are so common, in Germanic languages at least (not sure about other language families) they get "shortened" to a compound adjective in which the noun from the original adverb phrase ("to water") gets shortened and stuck on to the beginning. The general rule is to hyphenate the compounds if they consist of two or more elements and appear before a noun, and otherwise not to hyphenate.