I have one dog who doesn't need a crate, one who I kind of trust to be out when no one is there, and one that I cannot trust.
TQ has run of the house when I am gone. She doesn't potty inside, and doesn't tear anything up. I just have to make sure I don't leave out food. Tate is my iffy - I trust him, but I'm not sure I trust TQ to not annoy him the whole time. And, well... last time thegrey was left to his own devices in the house he ate half of a fire log. (It was not pretty coming back out.)
I think crates are a wonderful tool if used correctly and the dog isn't confined to the crate more than necessary. I have wire crates for all of my dogs (in addition to a small plastic one for Tate and the cat), and the two that actually use theirs enjoy going in for quiet time on their own.
As for water, my dogs have what looks like giant gerbil water bottles - made for dogs, of course. They can drink when they want.
Definitely look into using the crate for potty training. My family has used crates for potty training for as long as I can remember. Puppy goes out on leash, "go potty, go potty, go potty", if they do potty, they get "out" time in the house... if they don't, they go in the crate for 10 minutes or so, then you take them back out and encourage them to potty. They go in the crate every time they don't potty, and once they do go outside, they get rewarded for doing their business outside. Puppies catch on fast. (For my dogs, I say "go pee" and then they all pee... then I say "go poop" and they all go poop. It's crazy what they get!)
EDIT: Hope that rambling reply made sense. I just now re-read it. Yikes!
Edited to say, however... TQ and Tate have figured out how to open their wire crates with their noses and paws, so I bought a "backpack" combo lock that I leave with the combination in all the time (it is karabiner style... I just couldn't find a karabiner at the time, one would suffice though!). I loop it near the lock where the door latches to the frame... that way they can't break each other out and they can't break themselves out.