The most likely cause I've found of grainy buttercream is low grade powdered sugar, like a generic or store brand. Unfortunately there's not a lot that can be done about it, although you can try beating it on low speed for a few minutes, some people have reported success with that.
I'm stumped by why you need to simulate water. 
Could you explain more?
Ohhhh! 
Piping gel mixed with blue food color will do the trick. 
Imperial is not what I consider a generic, but it's possible you got a bad bag. If it's inedibly grainy, I would just throw it out and start over. Maybe someone else will chime in with a better solution though?
I've heard someone else mention that if you beat the icing a little longer on a lower speed it will help with the graininess too. that's actually why I gave up on powdered sugar icings, I use IMBC now and it's perfect.
As for green, I find that when I need a green like grass, I add a touch of brown. A really tiny bit. And then yellow for a brighter green. I don't know if that will help, but I figured I'd throw in my two cents 
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