The reason ford make them water cooled is to help with muppets turning the car off when the turbo is red hot. As the S2 was meant to be a mass produced everyday car, the additional heat absorbed by the engine from cooling the turbo can be relatively easliy dealt with compared with the potential for mass warrently claims!

Things will be VERY different as soon as the boost goes up the cooling system cannot cope! Probably the reason the S1 never had the water cooling core as it was designed with motorsport intentions.

The very reason my T61 does not have water cooling is the the fact I would need a rad the size of the front of the car to cool it LOL! But it would add a silly amount of additional heat to an already stressed cooling system.