Water generally doesn't smell all that much. It does sound like you need to head for the glowplugs but I've got no experience of removing stuck ones - I've only changed them on a mate here's old Renault van heap thing and they were a doddle. I'm not sure about trying it on a hot engine either, the expanding thread thing does sound a bit counter-intuitive.
A swift Google later -
Method 1 - soak them with WD40 and leave them for a while (a few hours perhaps), use a close-fitting 6-point socket (a 12-point may round them off before they move), if they still won't budge try
tightening them a little first.
Method 2 - remove cylinder head...
There's also this:
Beru, one of the GP manufacturers recommends the following:
1. Heat up: Run the engine until it is warm or apply current to the intact glow plug through a separate cable for 4-5 minutes - this heats up the glow plug and burns it free.
2. Release: Apply a generous quantity of anti-rust agent or multi-functional oil to the base of the thread and leave to work in for approx. 5 minutes.
3. Unscrew: Then start a new attempt to unscrew the plug and use suitable tools to release the glow plug from the cylinder head. (Do not exceed the maximum release torque – 8mm GP-20Nm (14 foot-pound), 10mm GP-35Nm (26 ft-lb), 12mm GP-45Nm (33 ft-lb). Make sure you stop before you reach the breakage torque, if necessary start a new attempt by applying heat.)
Again with the hot engine
Hokay... I'm not sure about exceeding the maximum torque, if they're still stuck I think you have to go for broke, you'll end up removing the cylinder head anyway if you don't.
Most of the rest of them seem to be about removing glowplugs when the end has blown out, but you didn't even get to this yet. I guess if they do start moving turn them back and forwards, easing them up a little a time like you were cutting a new thread in them, rather than give them some welly.
