we apply the variational implicit solvent model (vism), numerically minimized by the level-set method, to study hydration effects in the high-affinity binding of the b2 bicyclo[2.2.2]octane derivative to the cb[7] molecule. for the unbounded host molecule, we find two equilibrium dielectric interfaces with two different types of initial wraps. the host cavity shows capillary evaporation when the initial guess is a loose wrapping; while the host is completed hydrated when a tight initial guess is prescribed. in good agreement with md simulation results, the hydrated case is more favorable due to solvent-solute electrostatic interaction advantage. for the guest binding we find reasonable agreement to experimental binding affinities. dielectric interfaces of the system during the binding process are given by level-set simulations. individual free energy contributions show that water-mediated hydrophobic interactions based on decreasing water unfavorable concave surface upon binding and electrostatic interactions are two major driving forces for the binding process. the findings are in line with recent computer simulations and experiment data. with further refinement the vism could be a promising tool for an efficient calculation of molecular binding affinities.