Iced water would be, if I'm not mistaken, the use of the participle while ice water would be the use of an adjective. Either way it's okay.
if the ice cubes are crushed, it's iced, in my book. if it's just ice cubes in water, it's ice water.
Quoting wonderwomanT08:Ice watermark
ice water can also be seen as a compound noun.
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