Water Engine?

They don't, unless you're thinking of a steam engine. Those do.

There's at least one thread on the topic on a2k here somewhere. this is the whole "brown water" thing, right? Some guy three or four years ago claimed he had plans and was building one and would drive it to NYC that autumn and show all the scoffers. He hasn't been heard from since. Guess he never made it to New York. Maybe his GPS failed and he's stuck in the boon docks somewhere. Or the engine didn't work.

You will have to define the terms "water-powered" and "works".

There are engines that rely on the temperature difference between relatively hot water (i.e. at the surface of the ocean) and cold water (deep down). You also can run an engine from energy you find in tides, or in running rivers.

But you absolutely can not break the laws of physics which, for one thing, state that you can't create new energy where there was none.