Chalmers conclusion is right but his speculation about pipes and people doesn't follow. What he forgets is that functional organization requires functional elements, invariance doesn't imply (strong) functionalism. A set of water pipes can no more constitute a conscious entity than they can form a nuclear reactor core. This is because water pipes don't have the necessary functional capability: of being like neurons or fissile material respectively. Unlike the case of the nuclear reactor, however, the necessary and sufficient properties for consciousness have yet to be determined.
It may be the case that the electrical activity of neurons is their relevant property. If so then silicon chips that perform the same electrical functions would do the trick (as imagined by Chalmers in his paper): properly connected, they would be just like the brain, consciousness included. By the same token, neither water pipes nor people could form a conscious functional organization however you arrange them because they don't have the necessary electrical properties.