SE, there are racks that are designed to fit on your seat post that have attachment points for your panniers. Using zip-ties, you could attach standard water bottle holders. Additionally there are water bottle holders that fit on your seatpost, behind the seat. Just FYI, apparently you have found work-arounds!
I mentioned the weight issue of a backpack on a bicycle because it puts your weight higher, thus making you less stable, but with the bike in question, that may be the best solution. Many "cheapo" bikes have unnecessary "bells and whistles" that add weight and complexity without adding effeciency or durability. Keep your eye out for a rigid frame, perhaps even a rigid fork bike, like an old Specialized Rock Hopper or a Trek 750 or the like. You will get a lighter, better quality bike with the braze-ons (the little eyelts that allow you to attach stuff), and with quick release hubs on the wheels (to make tube changes easier). Again, just FYI, and not meant as a slight on your current set-up. I used to work at a bike shop, so I can't help it
I mentioned the weight issue of a backpack on a bicycle because it puts your weight higher, thus making you less stable, but with the bike in question, that may be the best solution. Many "cheapo" bikes have unnecessary "bells and whistles" that add weight and complexity without adding effeciency or durability. Keep your eye out for a rigid frame, perhaps even a rigid fork bike, like an old Specialized Rock Hopper or a Trek 750 or the like. You will get a lighter, better quality bike with the braze-ons (the little eyelts that allow you to attach stuff), and with quick release hubs on the wheels (to make tube changes easier). Again, just FYI, and not meant as a slight on your current set-up. I used to work at a bike shop, so I can't help it