kittens & hand biting

[Neural]

The easiest question to ask is: Why do they do it at all?

The more complicated way:
James and Penny, like many other cats we've had, have this tendency to see the hands (and feet) as a playmate/opponent to be tussled with.
Over the years, with the cats we've had, I have allowed the cats to do that with me, so long as they did not draw blood when biting. I've not had any major leaks from scratching, but I've had some scratches from an overzealous kitty. Cindel was able, at the same time, to teach the cats that her hands were off limits.

With James and Penny, we have decided that we should try and just keep the whole thing off limits (per suggestions from some websites that talk about starting proper behavior early with kittens).

The problems we are running into is that 1) the water gun works *too* well for James. I mean, he is terrified of it. He's not associated the water with the spray bottle yet, but when he's hit with the water, he panics, and generally chooses to avoid doing *anything* that he was doing at the time. Not just the "bad" thing, but everything. It took us a few hours to get him comfortable with being on the bed again after one shot from the water when he was attacking Cindels foot (which was under the blankets).

That brings up the second question. "Bed Bugs" as we like to call them. Meaning, when you have your feet/hands under the blankets, and the cats attack because they see an unknown moving around under the covers.
How do you deal with that sort of thing, and is it something that can be trained out, or is it okay to even encourage that as an alternative?

Any info would be appreciated. thanks.