Water can drip from the tail pipe. It's typically condensation or a byproduct of the cat.
When you set your timing, I believe that you have to jumper the plug near the driver's motor mount. You shouldn't have to change the cam timing. Check the ignition timing again with a light. If you can't turn the distributor far enough, then double check to see that you have the timing belt right, and that it's not off a tooth.
Also when you are adjusting the idle, you are turning the little brass screw on the throttle body right?