Good way to dampen tonearm?

The real issue is your adding quite a bit of weight, especially with Water, you might not have enough counterweight, especially if your cartridge is a higher gram cartridge. Beyond that yeah permanancy of it is dangerous, and how would you really Seal water into a tonearm safely? I sure would not want it coming out on my equipment or record labels. By the way they make Tonearm damping Gel's of some type, and at least this would be a gel not hardend foam or runny water which you could still pull wiring and stuff thru I would guess, I think KAB turntables(?) somebody like that sells it.

There are a couple of inexpensive ways to dampen your tone arm that are easily reversable. One is to wrap the arm tube with plumbers teflon tape. Simply wrap the entire arm, or alternately, two or three spots with multiple layers of the tape. Another is to purchase some shrink tubes from Radio Shack. These are 4" long plastic tubes that can be slipped over the arm tube and shrunk snugly onto the armtube by gently heating them with a hair dryer. Either of these techniques will have a dampening effect and you can decide whether or not you like them. If not, simply remove them and you'll only be out a few dollars, at most.
Finally, Herbies Audio has HAL-O JR dampers that might work as well and if you don't like them just return them for a refund: http://herbiesaudiolab.home.att.net/jr.htm

Why not dampen it with something from the outside instead of the inside? I remember a local audio dealer that did this with a Well Tempered table (not sure of the arm). He had it wrapped just as you would re-wrap a tennis grip. It was a rubbery material maybe 3 millimeters wide. I'm not sure what it was exactly, but this is certainly an idea to explore. Good luck!

I successfully dampened (wrapped)a tonearm using tiny foam wrap tape that was either from the dental or medical industry. Internally, the foam earplugs seem to be a good shot.

Oh yeah, I forgot to mention I experimented with various shrinkwrapping on the arm also. It is good as it is easily removed.