Cavitation is not caused by using the wrong type of water. HERE is a good article on what cavitation is.
I use distilled water in gallon jugs. Tap water is a BIG no-no. The only time I'll use tap water is when flushing the system with a garden hose.

De-ionized is best for batteries. I've seen what it can do to metal on it's own and I don't know if the coolant chemicles will prevent that over the long haul.