Water injection is by no means a new technology. It has been used since the second world war on fighter planes. Back in the 30's there was extensive research done proving it's potential. It is almost standard equipment on WRC cars.
Alcohol DOESN'T cool better than Water. Off the top of my head, I think Water's Specific Heat is twice that of Alcohol. The alcohol is generally used for three purposes. It can be treated as an extra mean of injecting fuel, it prevents the water from freezing in cold temperatures, and during combustion it helps the fuel combust at a more even rate.
Remember that water injection doesn't increase octane. It lowers intake temperatures. This by itself doesn't increase power. It DOES decrease the likelyhood of detonation, and it DOES allow the computer to run the optimal timing, therefore making more power. The same effect could be had from high octane race gas, but it is MUCH more cost effective.
And YES you can use plain old blue windsheild washer fluid. (get the cheap stuff as it generally has the fewest number of chemicals in it) The BEST gains would actually be had from straight water. To increase it's effectiveness even more, you can lower the waters temp via the addition of ice, and increase the effeciency of the system over 100%.
As far as placement of the nozzle, the standard rule today is after the intercooler, but as far away from the TB as possible. It is most commonly placed in the collector on the cold side of the intercooler. As was previously stated, the other placement options have some drawbacks, where as this has none, as long as you use a good check valve, or solenoid, which should probabally be used regardless.
My personal fav, and the system I intend to run;
http://www.coolingmist.com