I can attest from experience to the fact that water does push sideways, and that if you stand a dwarf in a column of up/down stairs and flood it with water from beneath, the dwarf will not move up or down any z-levels.
My first water tank had one wall about five z-levels up built entirely out of wood, which was bad since I desperately needed that for other purposes. Unfortunately, it was also full, and I hadn't come up with the idea of attaching one of my floodgates to a drain yet. I figured whatever, I'll designate those walls for removal and lose some peasants, no big deal.
Unfortunately, the fortresses' entire juvenile population decided to remove those walls when I wasn't paying attention. Three children died that day from the world's largest water slide, sans slide. Fortunately, one of them was the Duchess', which led to a festive centerpiece for my zoo. (I swear, the little buggers made it at least six squares over)
The second one was an external column I'd built to see if I could induce the U-Bend bug (I'd hoped it would fill my tank faster than pumping up from the river). Unfortunately it didn't work, so that chamber became my dwarf-killin' room. Draft the wounded, station them there, forbid the door and pull the lever - instant drowning. They never moved up any z-levels unfortunately.