A few thoughts:
1. mixing kibble with water and leaving it out all day is creating a breeding ground for mould/bacteria.
Have one bowl for water and one for food.
2. leaving food out all day (i.e. "free feeding") is not a good idea for several reasons, but mainly because you have no control over how much the pup is eating during the day (which can lead to over or under-eating), plus it sound like your cat would have access to the dog food and vice-versa. I would strongly recommend feeding the pup 3 times/day, and measure out the amount of food for each meal. Put the food down on the floor for 15 minutes. If the pup doesn't eat, remove the food. He should learn that you control the food resources very quickly, and will eat the food you're providing at the time you provide it. If you use this method there would also be no issue mixing water into the food if you still wanted, as it would not be sitting out all day.
3. what kind of food is your little one eating now? why not have a look in the food forum for some excellent suggestions of healthy, quality foods for your new family member?
Solomon - black DSH - king of kitchen raids (11)
Gracie - Mutterooski X - scary smart (9)
Jaida - GSD - tripod trainwreck and gentle soul (4)
Heidi - mugsly Boston Terrier X - she is in BIG trouble!!! (3)
Audrey - torbie - sweet as pie (11 months)
Patrick - blue - a little turd (but we like him anyways) (6 months)
Boo, our Matriarch (August 1 1992 - March 29 2011)