However, other conditions aside, oleoresin capsicum and its correlate chemical found in the other major branch of the pepper family, capsaicin, are indeed fat-soluble (easily demonstrated on your kitchen counter, btw) and I stand 100% behind the commentary about ways of eating even the hottest peppers w/o pain or discomfort.
Feel free to conduct experiments on water-solubility vs. fat-solubility regarding either oleoresin capsicum or capsaicin (ever wondered why capsaicin, packaged as a dietary supplement, is ALWAYS coated?). I believe you'll arrive at the correct conclusion after about 2-3 tries, no more.
The number of volunteers dropped quickly after some tests.
/johnny