That is his toenails making the noise.

Water dragons generally do not do well with glass enclosures because they do pace and give themselves nose rubs. Make sure there is enough decorations, fake plants, things to climb, so he feels secure and then black out the bottom portion of glass where he can see out. This can be done with construction paper on the outside.
I have found they are pretty flighty, but will calm down with short, positive handling sessions.

How large is the tank you have him in? I think the bigger the better for these guys.