But that was my point, spent fuel doesn't have to be kept in water
at all, if it is sufficiently dispersed. Take a spent fuel assembly remove each of the fuel rods and lay them down on the ground and you're done caveat two things, one they emit alpha, beta, and some gamma radiation and two they warm their surroundings. So there always exists a solution to the equation of heat generated over time = heat absorbed by ambient air keep the total temperature rise below that of the safe temperature of the cladding.
If you lay a spent rod out on the ground in the air, it may glow (would depend on the amount of material in a single rod) and you wouldn't want to approach it without protection (again more material more radiation) but it would be fine.
The reason people put these things in water is two fold, one is that water is a great transporter of heat and you can generate almost an arbitrary amount of heat in a small space if you have enough water flow to carry it away (ask any highend gamer PC aficionado :-)) and water absorbs neutrons, which if they were not caught and hit another fissile atom nearby slowly enough might spit it, or a non-fissile atom might become an unstable nucleotide (which is going to eventually emit an alpha or beta particle)
If the material is clad in a neutron opaque material and can transfer the latent heat to the surrounding atmosphere or fluid at a rate that keeps the system temperature under the breakdown temperature of the containment, then it will be stable "forever".
Yes, it takes a year or two for the short lived nucleotides in a fuel rod pulled from a reactor to decay, but once it has, you can safely store this stuff.
In terms of why we haven't, most of the issues around storing high level nuclear waste arise because third parties do not want to encapsulate permanently this material, because doing so would make it uneconomical to recover. And in that calculus they know its "easier" to reprocess spent fuel for bomb grade uranium and plutonium than it is to build a breeder reactor to make it.