I have always assumed the basic generator works similar to a real life stirling engine and just converts the mechanical power into electrical. It would mean no water would be necessary and would explain why it is the base for many of the other generators.I like your suggestion. Geothermal and Thermal generators should be a little more creative instead of converting molten hot rock into electricity through magic. If it required water and worked like a steam engine, that would make more sense. Even regular generators should require this, burning coal or wood doesn't magically create electricity.