I've made them both ways, both sealed and open. The sealed is very hard, I had to put straps around the bucket to hold the lid on and it still leaked sometimes. Right now, I have an open-topped bucket, its filtering my snapper setup, and I have the bucket sitting right in the kiddie pool the snapper lives in. I just cut a notch in the bucket for the water to flow out. Its not the prettiest thing, bu probably the most effective filter I've ever made. I also use lava rock for substrate, works well and costs waaaaay less than 5 gal of bioballs.
the first one I built, I had a bulkhead on the side near the bottom and the water would flow in there, up through the bucket, and out another bulkhead near the top. It worked great, except for the leaking like I said. I also made a similar setup out of 4" pvc filled with lava rock, two 4' pieces parallel on the floor. This one was much easier to seal, and also easier to hide behind the tank.