Jack,
Yes, you can thin acrylic paint with water. Artists and animators often dilute it quite a bit with water to produce a "wash." If the color was somewhat translucent due to water-thinning and you applied it with a sponge like Kitesurfer suggested, then you, too, will be producing a wash. Of course, this type of application is not an aerosol that you spray on.
In the US, Sprayway Clear Fixation Sealer is widely used on top of the art work (
www.jurgeninc.com/clearacrylicprotectivecoating.htm). It's acrylic, too. It's probably not absolutely necessary to apply this before glassing, but I think I would use a sealant like this. Krylon brand acrylic aerosol paints are OK and very widely used in the North America due to their thorough distribution in retail stores (
www.krylon.com/). It's certainly not the worst paint. I know you are in the UK, but maybe knowing about these things will help somehow.
Airbrushing or spraying water-based paints is not so easy. However, it is easier than it used to be because many automotive paints in the US are water-based now. Prior to this it was next to impossible to get good results spraying water-based paints using anything except rattle cans. If you don't know someone that has spray equipment that can guide you along, I wouldn't buy equipment and try to learn by experiment. Experimentation can work and some guys are quite handy at figuring out how things work, but it will take much longer to teach yourself.
Funny things about acrylic paint:
1) At it's point of origin (?1950's), it was mineral spirit-based
2) When acrylic paint is sold in North America as house paint, it is called latex paint even though there is no natural latex in it from the rubber plant
3) Acrylic paint sticks well to many surfaces, but not engineered wood; so, it should be OK on surfboard foam
Be sure to post a photo after you have completed your surfboard project.