Yes. I would put the capacitor closed to the coils supply to get maximum local charge.
Regarding high voltage ignition, just found out a collections of experiments under the name of "water spark plugs":
http://www.google.com/url?sa=t&sourc...mmDlro55wjhZmA
Something might be worth while and similar to what shown on the site.
Note that a boost converter is quite cheap to do with today electronics.