[color:"orange"]being in contact with either of the substances is by itself not harmful for us.[/color]
That depends on the contact. Most humans have a relatively low resistance against water if it is completely covering their nose and mouth. Water focused through a small area under high pressure can cut through rock. Larger volumes of water can stun or knock you over (ie firehose used on rioters) and if fast enough can break bones, etc (ie someone falling off a high bridge). A bucket of water dumped on your head isn't going to do much, but if you were hit with the same amount of water fired by an air cannon, it could be fatal (you'd definitely feel it, anyway). Also, since the human body is more than half water, anything that can manipulate water directly (move, stop, heat, cool, etc) has the potential to do a lot of damage.
Most of what you're talking about there isn't water damage. Water entering the body is drowning damage, perhaps the closest thing humans have to water damage. Water cutting a rock is pressure or tearing damage. Being hit with a water cannon is impact damage. Falling into water is also impact damage, only less so than hitting solid ground. Water, while not solid, is still substansially more dense than air, hence it's like being hit with a relatively soft, but very large club.
You could convert water spells to conventional damage and then possibly a cold damage bonus or a slow or stamina drain effect, but this would restrict the type of water spells you could have.
That makes more sense. Combined with other ideas, water is no longer a damage type, but a set of spells that can cause a range of damage types: impact/bludgeoning (water cannon), peircing (ice splinters), cold (ice), heat (steam), acid (acid rain), slowing (drench)... Spells for creating and clearing fog extend the magic beyond simple combat. Water magic become highly versatile instead of only "does water damage."
Earth magic could range from earthquakes to ripping boulders out of the ground (and hurling them at opponents) to blinding sandstorms, so it isn't hard to see how it could do damage. There is less earth in the human body than water, though, so there is less potential for damage inherently due to earth or from magic that can manipulate earth.
Again, forget the cause and look at the impact. Hit by a rock: impact/bludgeoning damage. Stuck in a sandstorm: low visibility, choking, slashing damage from razor cuts.
You seem to have a problem with water, earth and air damage because real humans are not inherently vulnerable to these elements. However, Rivelon is a land of magic, where humans can learn to control the elements. With control comes the ability to at least partly counter spells based on these elements, either inherently or using an enchanted object (charms, crystals, or armour bonuses).
That works. Having resistance to a class of spells reduces their effective level. Take Impact Damage Resistance
to protect yourself against a range of damage sources, some earth magic, some water magic, some weapons; or take Water Magic Resistance
to reduce the effect of all water magic used against you or in your proximity, but not earth magic or weapons. My biggest gripe with Beyond Divinity is the multitude of meaningless elements. Eight or ten damage types and only Poison Damage has any significant difference to them all. The resistance skills seem next to useless. By overlapping the resistances each doesn't feel quite so useless anymore and it adds strategy in selecting your spells.