How does yeast feed on the water
Yeast does not feed on water, it feeds on carbohydrates, i.e. sugar and flour.

If you got the impression that it feeds on water, it might be because you used dried yeast, which is basically dormant yeast that gets reactivated by the water. 

If you use lukewarm water alone to activate your yeast, it feeds on the food remains from the growing medium, if you add a pinch or two of sugar (not too much!), you will see more vigourous bubbling.

Yeast has two types of metabolism, aerobic (with oxygen present) and anaerobic (without oxygen). Both metabolize sugar and create CO2 (the bubbles), the aerobic one also produces water, the anaerobic alcohol (think about wine, for example). The latter is also the predominant process in baking.

For a more kid-friendly explanation, which mine loved:


  Yeast eats sugar and burps CO2. Those bubbles get trapped in the dough and make it fluffy.




A few links with kid-oriented material and experiments:

http://sciencewithme.com/what-is-yeast/
http://redstaryeast.com/science-yeast/what-is-yeast/
http://redstaryeast.com/science-yeast/yeast-experiments/
http://www.scientificamerican.com/article/watch-yeast-live-breathe/
http://www.kidsdiscover.com/teacherresources/science-of-yeast-for-kids/