Water not necessary, make sure that the jam covers all the sides and top. Put a little icing sugar on your hands and use them to smooth the icing over the cake whilst very gently pressing it against all the surfaces. I wouldn't use the fridge (might cause the icing to go sweaty) just use an air tight tin (old biccy tin or something) and you should be fine.
Oh and make sure that you sieve the jam before melting it - even the minutest lump wihh show on your icing (learned that one from experience lol). Many bakers suggest apricot jam, but to be honest, I use any. Hope that helps.