Water cooling still has noise from the pump and the cooler, so it's not entirely noiseless. A lot quieter than most fan solutions though.
If they can't get larger than 40mm, that might be a problem. I have two 120mm Nexus Real Silent case fans in my media center, and they're almost inaudible when you're not right up close to them, but those are never going to fit in that server. I've seen some fan adaptors though that basically look like one of those duckbills you can put on shotguns, only square. One end would be 80mm or something, and another end would be 120mm, and when you'd put a 120mm fan on it all the air would get forced through the 80mm hole. Perhaps you could get something like that for 40mm, and mount it externally?
