if you're using an LCD display, yes water is okay; they also make LCD cleaning solutions which probably do a better job... for CRT, you can generally use windex sprayed on the towel, not the screen (if it drips down the screen, it could go behind the plastic... )
if you can, i'd go to compusa or bestbuy or somewhere and buy some screen cleaner for whatever monitor you have... the LCD cleaner conditions the plastic i think, and the CRT cleaner is designed not to corrode the anti-glare coating.
I had the same question a few months ago... because I purchased the 17 " imac. I purchased iKlear and it works great.
no streaks.
looks perfect everytime I clean it.