Is it possible and if so how difficult and rough cost of changing a air cooled engine to water cooled?

All depends on what your after. Plenty of people convert bay window buses to water cooled, so a T3 would be no more of a challenge. If you want to cut the front open, there's even room there for a radiator.
Most people go for Subaru upgrades, but there's a range of engines people have installed.

You could of course just buy a later bus

I believe gearboxes are significantly different
Definitely easier to buy a water cooled to start with