Most people carry a tube to use first, and a patch kit to use as backup. A patch takes some time to cure properly, so when you get a flat, put the tube in and patch the flat one for nest time. I carry a pump, since it always has enough air to fill a tire, even if you need to do it more than once.
There are a lot of good small saddle bags out there. It all depends what you are looking for. I have a couple from Jannd that I like:
Bicycle Seat Packs
For water, I like the Polar insulated 24 oz bottles.