I agree that the carburetor must be tuned for this application.
First thing is to increase the size of the idle jet (for fuel) and test. It is also a good idea to unscrew the  idle mixture screw a couple of turns. This will have effect in idling and the transition regime.
The next is to increase the main jet, as the others said before me. Do not confuse the fuel jets with the air jets. The air jets don't need to be enlarged.
The main jet helps engine when throttling from, let say 2000 to 4000rot/min.
Pay attention to the float level as well. If too small, it will be hard to accelerate. If too high, the engine will suck fuel (water) trough the main jet too soon, getting worse mpg.
Yes, we need to know the type of carburetor to talk more specifically.
Maybe is a good idea to treat the water by passing it trough a small HHO cell, prior to send it to carb. That will help the water vaporize better and release easier the Hidrogen and Oxygen to be burned by plasma. Or at least heating the water through a copper pipe coiled to the exhaust pipe or the radiator hose, for better vaporisation, at least in the winter.
Capacitor70, I can't wait to see your engine running smooth, after adjusting the carburetor.
Good luck!

P.S:
What type of water do you use? Distilled? Tap water?

The ignition coil voltage is VERY important.  Most of the time it will be nagative, but we need positive otherwise the diodes will hae to be reconfigured.  This step should be highlighted.  Also jet sizes increased is a must for revving.  Good work and congratulations on being the first to replicate, if not second.

Quote from: capacitor70 on July 04, 2008, 12:44:51 PM
xbox hacker 
Ignition coil must generate +ve, It is very simple just swap input wires...

Its a magneto...how do i swap the wires?

Quote from: xbox hacker on July 04, 2008, 03:48:22 PM
Its a magneto...how do i swap the wires?

Then use saperate ignition coil, like I am doing.

What type of water do you use? Distilled? Tap water?
Its tap water. (bore water)

WARNING:
CIRCUIT IS OPERATED FROM MAIN SUPPLY, IT GIVES ELECTRICAL SHOCK TO ANY TERMINCAL AND BODY OF ENGINE, GIVE EARTHING TO ENGINE BODY. REMOVE SUPPLY PLUG AND DISCHARGE CAPACITOR BEFORE TOUCHING ANY THING.

I don't think is a good idea to use tap water in the carburetor... Sooner or later, the salts and chemicals in it will be deposited in the carburetor (jets, circuits, transition holes) and will decrease the amount of water delivered to engine.
The best for carburetor would be distilled water, or mounting some sort or demineralizing filter (magnetic ?) for water, before the carburetor.