"I drink water."
Hm... nope. I am drinking water, as a present continuing action, is 我在喝水; as a present habit, it would need more context for the best way to say it and we probably would use 我現在只喝水, etc.
Is water used to mean "liquid" in general with the verb to drink, in the same way that "fan" is used to mean food in general with the verb to eat? Or does this literally mean "i drink water"?
水 means water and is not used to generalize to liquids or beverages.
Nonetheless when forming compound nouns it may represent liquid, e.g. 汽水 soda, 香水 perfume, 藥水 medicine (in liquid form).