Sounds like denation to me... Is your engine running hot? If so, that could cause it. Also if your RPMs are too high, it will diesel a little before turning off. I suggest using high octance gas and some kind of cleaner you add to the fuel for carbon deposits, try it for 2 to 3 tanks of gas and take it on the freeway and slam on the gas hard for about 1-2 seconds then let go and do it again to try and clean out the combustion chambers.
I would also check the fan clutch and coolant level.
As for injecting water, I don't recommend it... if you inject to much water, the rods might bend due to the fact that water doesn't compress.