Hi, sorry for answering so late.
I think the key that you are missing is:
1) You have to collapse the waterbombs in lines, not in colons, i.e. you do 8 lines of 16 waterbombs, not 16 rows of 8 waterbombs...
2) The row you are transforming into waterbomb bases has to be at a 90° angle from the paper not yet "waterbombed".
So you take your paper, you fold the first row at a 90° angle from the rest and collapse the first row of waterbombs, while pleating the rest of the paper valley-mountain-valley-mountain (or vice-versa, if you start with a half waterbomb). Once you have completed the first row, your paper will be completely pleated, i.e. a small stripe of pleated paper with the waterbombs, also squashed, at a 90° angle.
Now you open what you pleated at the level of the second row (one square down), fold it to a 90° angle from the rest (this will only be possible once you opened it), and you collapse the second row of waterbombs, while pleating the rest of the paper exactely to the contrary of what you did before: mountain becomes valley and valley becomes mountain...
and so on.
Here is a video:
http://www.youtube.com/watch?v=0O4sb6xl ... ion_336441
(part1 and 2 are about precreasing)
and here is video on how it does not work:
http://www.youtube.com/watch?v=uyX-T4y_INQ