The water spittting you talked about is from the compressor being too hot, condensing the airs humidity. moisture traps help, but dont eliminate the problem. Most compressors have running time before you ought to rest them to let them cool off.
Also drain any tanks regularly. There should be a valve for this at the bottom, take it outside, and perhaps do it over a rag

if its been in there a while your tanks probably rusted and itle be a bit messy.
water is okay to a point for thinning, but after that point it destroys the paints surface tension, and the acrylic polymer cannot form long enough chains for the paint to cure properly. Using an airbrushing medium usually works a lot better.
This will become noticable for achieving any level of detail work with the airbrush.
Alcohol can work well, but can cause problems with some pigments and be fine with others. And still has the problem of over thinning that mediums do not.