What was the significance of the miracle in connection with water that Moshe was to perform in front of Yisrael?
Rashi: It was a sign that when Hashem would punish the Egyptians, He would begin by striking their god. 1
Seforno: Because to create a mixture from a single ingredient is totally inconceivable.
Da'as Zekenim: It was a hint that Hashem will spill the blood of Mitzriyim in [Makas] Bechoros and at the sea.
Rashi Yashan: The River Nile which they worshipped, because it was responsible for their sustenance. Whenever Hakadosh Baruch Hu punishes a nation, He always strikes their god first.
Why did Hashem repeat the word "Vehayu"?
Ramban and Rashbam: It is the way of the Torah to repeat words in this way, 4 either for emphasis or because of the long break between the two locations.
Otherwise we would have thought that it turned into blood whilst still in Moshe's hands (Rashi).
See Ramban's objection to this explanation.
Moshav Zekenim: Do not say that the Torah could have written only 'you will pour it to the ground, and it will become blood.' If so, I would think that all the river will turn to blood!
Why were Yisrael more likely to believe the third sign than the first two?
Moshav Zekenim (verse 8): The first two signs, [the staff and hand] reverted back immediately. The blood did not return to water immediately.