Not sure why water vapor would expand greatly at 100 Celsius, but any liquid water that had condensed in the tire surely would vaporize and expand hundreds of times. Also, water tends to condense in air compressors and get into air lines, so the fill air could have a lot more water than the ambient air. (It could also have less.)
Another advantage of nitrogen is that it reduces oxidation. Not just the explosive kind, but the gradual kind that causes rubber to deteriorate over time. How big a factor that is in overall tire life, I don't know.