The volume penalization (VP) or the Brinkman penalization (BP) method is a diffuse interface method for simulating multiphase fluid-structure interaction (FSI) problems in ocean engineering and/or phase change problems in thermal sciences. The method relies on a penalty factor (which is inversely related to body's permeability $\kappa$) that must be large to enforce rigid body velocity in the solid domain. When the penalty factor is large, the discrete system of equations becomes stiff and difficult to solve numerically. In this paper, we propose a projection method-based preconditioning strategy for solving volume penalized (VP) incompressible and low-Mach Navier-Stokes equations. The projection preconditioner enables the monolithic solution of the coupled velocity-pressure system in both single phase and multiphase flow settings. In this approach, the penalty force is treated implicitly, which is allowed to take arbitrary large values without affecting the solver's convergence rate or causing numerical stiffness/instability. It is made possible by including the penalty term in the pressure Poisson equation. Solver scalability under grid refinement is demonstrated. A manufactured solution in a single phase setting is used to determine the spatial accuracy of the penalized solution. Second-order pointwise accuracy is achieved for both velocity and pressure solutions. Two multiphase fluid-structure interaction (FSI) problems from the ocean engineering literature are also simulated to evaluate the solver's robustness and performance. The proposed solver allows us to investigate the effect of $\kappa$ on the motion of the contact line over the surface of the immersed body. It also allows us to investigate the dynamics of the free surface of a solidifying metal

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