First of all are you sure you have no breaks in the hose, the hose is all screwed in correctly and there are no leaks anywhere? If so use oil and a syringe rather than water to bleed the brake. 1 - Fill the syringe with oil and get all of the air out of it. 2 - Remove the bleed bolt on the lever and screw in the syringe (tighten with a spanner to stop it coming loose). 3 - Remove the bleed bolt at the slave and attach the other peice of hose. 4 - Compress the syringe until the fresh oil starts coming out of the lover tube. 5 - Remove the lower tube and refit the bleed bolt. 6 - Squeeze the brake lever and release it a few times while flicking the tubing/lever etc. A few air bubbles should be leaked into the syringe. 7 - Keep the syringe in a vertical position to stop the bubbles re-entering the brake, compress the syringe until you start to see the pistons move. 8 - Remove the syringe and refit the bleed bolt. Squeeze the lever and see how it responds. I find it often help to repeat the process attaching the syringe to the slave as the bubbles will float to the top of the oil (i.e. the lever) making them easier to remove. This process should be done with the brake in situ as it keeps the lever higher than the slave and the hose straight. Use shimano mineral oil or citroen oil for best results. I use cooking oil which is a bit slow but I am going to try baby oil as I hear that it works quite well and is still quite cheap. The problem with water is that it does not lubricate the seals, it can go stale and the brakes are not designed for it so are more likely to develop a leak. Also it can freeze in the winter unless you use a mixture of water and antifreeze which is not great for the seals. However as said it is easier to bleed and feels more responsive.