Still not a good idea. I imagine the quantity of noxious vapors filling the air.
Yes. As I said above, the only current way that is "routinely" done and that works in the long run is using mineral oil, pumps, and an efficient cooling system. Mineral oil is safe, relatively inexpensive, has ultra low conductivity and absorbs little moisture.
"Liquid"/oil cooling is good but won't do much unless you can dissipate heat inside it. So you still have to add an heat exchanger (radiator), a pump to circulate the oil and fans.
Getting back to water, not only wouldn't it work but the fact it would "boil" is absurd. No CPU will get hot enough before throttling and eventually shutting down, unless it's actually heating because of short circuits.
Back to mineral oil again, CPUs need a passive heatsink on top of them. A CPU without any heatsink will not transfer enough heat to the oil to keep its temperature to a reasonable level.