I am sorry to hear that about the young nephew. I was dx'd with the same problem at age 9. I would be walking and just fall down. I developed it in my knees. The doctors thought I had "trick" knees or I was clumsy. But, I had the same problem as your young nephew. I really did outgrow it if that can be any comfort to you and your family. My advice would be to keep with the doctors recommendations making sure the young boy is taken to a specialist for children only. My opinion on why it happens is it is an immunity problem. I have never been well my entire life. I was born early and plan on dying late, lol.
I would increase vitamins and make sure he gets excerise. Walking is great and using compresses when needed. Go easy on Tylenol. I started running at age 13 and never stopped. Today the only telltale sign of it is unfortuntely or fortunately, my knees are alittle larger than I would like them to be in mini skirts; I am sure this won't matter to your nephew.
As far as the water, I don't think it would have any bearing but who knows. I would get it checked to rule it out. Maybe, like I think Rugged said, move him somewhere else for a couple of weeks. Also, Tool, get a book on herbs. I swear by it. Build up the boys immunity system. It is when your body takes a whack from something that something else can move in. I really would like to know how your nephew is doing from time to time.
*We had city water growing up.