Dropped iphone 3g in water, turned on fine, then problems.

What you should have done, immediately, after dropping your phone in water is turn it off. Dry all visible water from the outside of the device and then put it in a ziplock bag of dry white rice for a couple of days. By not doing that, you may have "shorted" something out: water plus electronics don't mix well. You can try doing this now, but I'm afraid the damage has already been done.

if it was water damaged wouldnt it just not turn on at all?

No, not necessarily. However, by turning it on you run the real risk of creating a short, thus permanently damaging your phone. Apple does have an out of warranty replacement program, the cost in the US is $199.

By continuing to use your phone, you run the real risk of doing even more damage. Water is a universal solvent. Couple this with the chlorine & other chemicals in tap water and you have yourself a potent mix that does not play well with micro electronics.

i dropped my iphone 3gs in water, left it to dry out for 2 mnths, didnt think it was going to work again, it now switches on but isnt lighting up or holding a charge, would be very gratefull for any advice. thanks.