Don't think the actual name has been mentioned yet, but you're looking for a wet wheel grinder. Internal water cooled wheel is more likely to get results for grinding wheels meant for surface grinders with through-wheel coolant systems, nowhere close to what you want. I'd take a look at the grizzly unit Cat posted, I've got to play around with a few and they seem like pretty well built machines. I hesitate to call them 'grinders' though, in my head a grinder is a tool meant to rapidly turn metal into dust. More apt to call the wet wheel systems sharpeners, in my opinion, they don't remove metal nearly fast enough to grind.
Oh, and you dip tools in water to cool them down to prevent drawing the temper of the steel, not carbonizing. Carbonizing is process where you heat iron in a carbon rich environment devoid of oxygen (sealed stainless steel foil pouch filled with sugar works) to close to its melting temperature and hold it there for a period of time to allow the carbon to diffuse into the iron and turn it to steel. Tempering is heating a piece of steel that has been quenched (hardened) to a certain temperature to soften it a bit. Get steel too hot, like at a grinder, and it gets too soft to hold an edge, which is why you have to keep tools cool whilst grinding them.
Fun fact, if your tools are made of high speed steel you never have to worry about heat softening them at the grinder. You can get the steel red hot with no Ill effect