Cut onions into 1/4 inch slices and separate into rings.
Place onions in a bowl.
Add buttermilk and refrigerate for 15 minutes.
Heat the oil to 365-370.
In a small bowl, stir together the flour, baking powder, salt and cayenne.
Dip the onion slices into the flour mixture until they are all coated; set aside. Pour the buttermilk from the bowl into the flour mixture add the water, the egg and stir until blended using a fork.
Dip the floured rings into the batter to coat, then place on a wire rack to drain.
Spread the bread crumbs out on a plate or shallow dish. Dip the onion rings into the crumbs on both sides to coat.
Deep fry a few at a time for 2 to 3 minutes, or until golden brown (turning midway).
Place on paper towels to drain.
Salt to taste.