You can run with the 165bhp chip no probs just get the boost set at 14psi on the the T3 actuator,
I run standard chip on mine with water but if i were to chip it i would blank the water up to keep the engine temperature down,
yes down the water that runs through the turbo goes back through the engine cycle hence higher engine temperatures,
The downside to NON-water cooled is that you have to let the turbo wind down correctly i would advice a turbo timer for this.