deffo needs a compression test, testers can be picked up most places from £10, and a very worthwhile tool in your box, i've used mine more than its worth. check the obvious, for water to be coming out the exhaust its extremely unlikely to be coolant - otherwise the engine simply wouldn't run, that will just be condensation.
you should be looking at an even spread of about 11-14 bar across the cylinders, if one cylinder differs by more than 2 bar from the other, retest, then if still no joy, put just less than a teaspoon of oil into the spark hole and crank the engine again with the tester in, that will check the rings are sound.
the obvious like creamy oil on the dipstick would be your telltale, check all the plugs are sparking and the dizzy is seated right too