I always use 91% isopropyl alcohol to thin Tamiya acrylics. It tends to make them dry pretty fast, sometimes too fast, so if that's a problem add a couple of drops of acrylic retarder to the mix.
Smoke sprays pretty well. I used it a few days ago for the first time and I don't think I added any retarder, just paint and alky.
I haven't tried just water for thinning Taniya paints. The Tamiya thinner has a note on the side that reads somehing like "Contains Alcohol components" or something like that. It smells just like alcohol, but I think it has some retarder in it.
If you are going to hand brush them (as opposed to airbrushing them) you will really need to add retarder. I put a few drops of paint in an old film can top and add a couple of drops of retarder. Without it the paint will dry on the brush between the paint cap and the model before I can get it in position to paint.