The reason water is a bad idea is because any water you don't get out can combine with the ethanol in gas and cause something called phase separation, where the gas turns to a goo-type mixture that can clog everything up.
It is just better not to introduce water into the system anywhere.
Several other options include taking the tank off, swishing a little gas around and dumping it out - do this several times and you should get most of it. You can dump the gas on some cardboard and burn it to get rid of the gas. After that you can do the rag on a stick routine to get what's left.
A different way of doing it involves attaching a clear plastic tube to a dowel and starting a siphon. Drain the gas that comes out into another can. Aim the siphon around the tank sucking up all the debris. When you are done, you can pour the gas that got siphoned out thru a coffee filter and catch all the crap you siphoned out. Then you can reuse the gas.