I have a 100w green LED and ballast. The LED gets hot enough to melt plastic within 2 seconds without cooling. Currently, the only effective way of cooling it I have found is to put an ice cube in a plastic bag and apply it to the back of the chip. The problem is, it can't be like this if I want to use it regularly. I was thinking of immersing it in cool water in a small clear container and having a pumping system pump cold water from a larger bucket in and out from it. I just haven't done it yet, because I am afraid the water might damage the chip in long term use. Would it?

Use a PC CPU cooler, along with the PC fan and thermal conductive material. The higher end CPUs disipate on the order of 100W so the coolers made for them gota handle the LED

A CPU cooler like this with some thermal paste should be fine. Be careful to not puncture the heat pipes when you make the fixing holes in the heatsink. Even a cheaper version like this should be fine enough. The LEDs support higher temperatures than CPUs.

Dont have to use one with heat pipes. Just get a good unit with tall heatsink fins, made for the high end 100..130W TDP cpu's

Kappa7 : But the LED is working all the time at 100W, the CPU only intermittently.. Low end "100W" units are not really capable to continuously cool down 100W (the unit's thermal mass is sufficient to sink 100W*few sec, but the thermal resistance to ambient air is too high to effectively dissipate this energy as fast)