Watercooling small servers is probably not worth it - just get some good AC - this would be a precursor to more extreme cooling anyway as even if you are watercooling, that heat is going to be transfered to the air eventually (albiet alot slower) which will raise the ambient temperature which without some sort of AC, will heat the room up gradually!
If you are looking for perfomance and high server density, watercooling is brilliant (see ibm 575) but again, without proper infrastructure and design, you would run into heat problems.
I fail to see how air cooling is more reliable than water cooling tho. Air cooling consists of a lump of metal with no moving parts (heatsink) and fans, which yes may break down but get some good quality ones you reduce this (mtfb's of 30,000+ hours on good brands) - but this problem is apparent in both solutions. With watercooling you have to worry about leaks, cleaning the loops, pumps failing. Reading some people have had very good experiances water cooling, but being reasonable, watercooling is more complicated, introduces more variables and thus, greater margin for error.
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