DURING THE PREVIOUS 7 MOS, THE ACFT HAD BEEN FLOWN ONLY ABOUT 2.5 HRS & HAD BEEN PARKED OUTDOORS WHEN NOT IN USE. ANTICIPATING THE FLT, THE STUDENT PLT & HER HUSBAND HAD STARTED THE ENGINE TO MAKE SURE THE BATTERY WAS OPERATIONAL. THE INSTRUCTOR PLT REPORTED THAT PRIOR TO THE FLT, THE SUMPS WERE DRAINED & FUEL SAMPLES WERE EXAMINED, BUT NO WATER OR OTHER CONTAMINATION WAS FOUND. REPORTEDLY, THE ENG FUNCTIONED NORMALLY DURING START, TAXI & THE 'BEFORE TAKEOFF' CHECK & HAD BEEN OPERATING APRX 15 MIN BEFORE COMMENCING THE TAKEOFF. HOWEVER, WHILE CLIMBING THRU APRX 300 FT AGL, THE ENG SUDDENLY LOST POWER. DURING A FORCED LANDING ROLL-OUT, THE ACFT HIT A LEVEE & WAS DAMAGED. AN EXAMINATION OF THE ACFT REVEALED WATER IN THE FUEL SYS. A MECHANIC ESTIMATED OVER 1/2 PINT IN THE CARBURETOR, APRX 1 PINT DRAINED FROM THE RIGHT TANK & APRX 1/2 PINT DRAINED FROM THE LEFT TANK. THE FUEL CAP O-RINGS WERE FOUND WORN & WOULD ALLOW WATER TO SEEP THRU. ALSO, WRINKLES RISING APRX 3/8 INCH WERE FOUND IN THE BOTTOMS OF THE FUEL TANK BLADDERS.