1Spread toasted walnuts on baking sheet and place in warm place (about 110ºF) for several hours or overnight. A gas oven with just the pilot light is ideal. Cool nuts to room temperature before next step.
2Combine nuts and crumbs in food processor and process until nuts are finely ground, yet mixture is light and dry. Spread in shallow pan and set aside.
3In shallow bowl beat eggs and water together. Set aside. Spread flour on shallow plate or pan and set aside.
4Drain olives of any liquid. A few at a time, dip olives in egg, then roll in flour, then dip again in egg. Let excess egg drip off olives, then roll olives in walnut mixture. As olives are coated transfer to parchment-lined baking sheet. Continue until all olives are coated with walnut mixture. Refrigerate coated olives for at least 2 hours before frying.
5Have canola oil heated to 360ºF. Lower 12 olives into oil and fry until coating is golden, about 45 seconds. Drain briefly on paper towels, then serve warm.