Much of the criticism I've heard has come from well-meaning people who feel uncomfortable seeing such a frivolous exercise linked with such a serious issue, but the results are undeniable -- the challenge has worked to start people talking about the illness and, most importantly, generated millions and millions of dollars in a very short period of time to help fund research to find a cure.
A few of the critics, however, just come across as humorless or bitter. The waste of water argument is disheartening, since dumping a small bucket of water in New York will not impact the drought in California, for example. The sad but very real fact that there are so many places on Earth without drinking water is a political and social issue that needs to be tackled on a broader level, and the folks getting drenched for ALS are, for the most part, genuinely trying to do some good and shouldn't be chastised for their innocent actions.
Time.com has an excellent article about how the ALS Association took ownership of the challenge, which originated with no link to Lou Gehrig's Disease. It writes in part: "What helps to make the ice bucket challenge succeed is that it is inherently mindless. We can handle that. It's simple enough, even fun, for kids and celebrities to take on; it's visual so the act can be shared with the greater community; it's achievable, in that nobody fails unlike say, a marathon or climbing Mt. McKinley. And it is endlessly, if mind numbingly, repeatable."
Many other non-profits are already taking notice and trying to capitalize on this fad, without looking like a copycat or being tasteless. (Maybe you've seen the "Mrs. Doubtfire Pie Face Challenge" to raise awareness and funds for suicide prevention.)
If any lesson can be learned from all of this, it's that people have money to donate to charitable causes. We just need to find a way to convince people that giving to charities can be just as rewarding as the many other ways they spend their disposable income, and find a way to encourage them to make it a habit. Organizations and people with vested interests (like Pat Quinn and Pete Frates who were inspired to use the Ice Bucket Challenge for ALS awareness) need to be creative to spread the word and make everyone take notice. That's the real challenge.