Sodium iodide has long been a paradigm for ionic and covalent curve crossing and ultrafast nonadiabatic dynamics, and our interest lies in the influence of solvation on this process. The NaI(H2O)n photodissociation dynamics are simulated with the molecular dynamics with quantum transitions method. A quantum mechanics/molecular mechanics (QM/MM) description is adopted for the NaI(H2O)n electronic states, in which a semiempirical valence bond approach is used to describe the NaI electronic structure, and a polarizable optimized potential for cluster simulations model is used to describe solute-solvent and solvent-solvent interactions. In contrast to previous work with a nonpolarizable MM model [Koch et al., J. Phys. Chem. A, 2006, 110, 1438], this approach predicts that the NaI ionic ground- to covalent first-excited-state Franck-Condon energy gaps reach a plateau by cluster size 16, in relatively good agreement with experiment and electronic structure calculations; this allows us to safely extend our previous simulations to larger cluster sizes, i.e., n > 4. The simulations suggest that the disappearance of the two-photon ionization probe signals observed in femtosecond pump-probe experiments of NaI(H2O)n, n >/= 4, is due to the shift of the NaI curve-crossing region toward larger NaI internuclear separations because of solvent stabilization of the NaI ionic state. Further, the latter causes the adiabatic ground and excited states to acquire pure ionic and covalent character, respectively, by cluster 8, resulting in NaI ionic ground-state recombination or dissociation. To make a connection with electron transfer in solution, free energy curves have been generated as a function of a solvent coordinate similar to that of solution theory. Inspection of the free energy curves together with the results of excited-state simulations reveal that the electron-transfer process in clusters is not governed by the collective motion of the solvent molecules, as in solution, but that it rather proceeds along the NaI internuclear separation coordinate, as in the gas phase. In fact, solvation in small clusters mainly influences the nonadiabatic dynamics by modulating the NaI internuclear separation at which the ionic and covalent curve-crossing region occurs. Furthermore, the simulations show that electron transfer does not occur in the inverted regime, as predicted by the free energy curves, because of the extreme nonequilibrium nature of the NaI(H2O)n photodissociation process, and the rate of electron transfer increases with cluster size and increasing solvation. Overall, this work demonstrates the importance of including polarization in realistic excited-state simulations of NaI(H2O)n relaxation.