If your playing the original red version you need to just hand the water to the guard, if your playing firered you need to get Tea from an old lady in the celadon mansion and give that to the guard.
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Celadon Pokemart -> 5th floor -> rooftop -> vending machines
At the top of Celdon city , well there is a building there and right at the last floor you can go to some vending machines and buy water and give it to them
Give the tea to the security guard that is blocking saffron city and he will let you through.
you need to get tea in celedon city and give it to the guard
Yes. Give a red scale to Mr. Pokemon and he will give you EXP Share.