Since confirming a critical hit is basically the same thing as scoring a critical hit and because of the critical effect that can occur on magical items even if the creature is immune to critical hits Blood in the water does indeed work in this situation.
I first thought it did not work but I'm still leaving all the first explanation here so all points of view can be observed, see the last bullet point in the ''However'' section for the main reason of the change in opinion.
Rolling a ''critical'' (threat) is not the same as a critical ''hit'', creatures immune to critical means you would normally do a critical against such a creature (example: a human vampire) but you don't.
Furthermore a part of what you shared makes it clear to me:
When you score a critical hit against an opponent, you enter a near frenzied state from the sight and smell of blood.
You need to do the critical hit and not just the threat.
On Critical hits:
When you make an attack roll and get a natural 20 (the d20 shows 20), you hit regardless of your target's Armor Class, and you have scored a threat. The hit might be a critical hit (or "crit"). To find out if it's a critical hit, you immediately make a critical roll—another attack roll with all the same modifiers as the attack roll you just made. If the critical roll also results in a hit against the target's AC, your original hit is a critical hit. (The critical roll just needs to hit to give you a crit. It doesn't need to come up 20 again.) If the critical roll is a miss, then your hit is just a regular hit.
Rolling a crit means you just scored a threat, you haven't critically ''hit'' yet you need to confirm it and for creatures immune to it you simply don't roll for the confirmation. So you just hit them without scoring a critical on them (or not if the threat range is higher than 20 and you don't have enough to hit).
Undeads have some traits such as:
- Not subject to critical hits or flanking .
- With the new info @CrimRei provided, I think it might be the
DM's call after all, unless some additional info can be found...
If I was to interpret this with my DM experience/opinion I would still rule that it does not work because the way I see this is:
you enter a near frenzied state from the sight and smell of blood
A sentence such as: You enter a near frenzied state from the sight of the extra damage you've done via the critical hit (or felt if you are blind etc.) would probably be more accurate, and that's what I meant by ''my interpretation'' (thanks @Hey ICan Chan)
Since a critical hit is supposed to occur for it to work, I believe the PC gets
a bonus from making the extra critical damage (more blood) and this buffs
the character each time he does so, an undead wich is immune will not
be more damaged than a regular hit, so even though it might bleed, it
will not be more damaged so it would not trigger in my game.
But since spellcasters are so powerful and melee builds need some love, I guess I would probably still allow it, even though I interpret it as it's not supposed to work as my first interpretation.
@MichaelDorf added a comment that is worth mentionning:
Key words here under Magic Weapons and Critical Hits '...On a
successful critical roll...' whereas Blood in the Water states 'When
you score a critical hit...' Further, Blood in the Water is a stance
not a magical weapon, ergo a character in the Blood in the Water
stance does not gain +1 bonus on attack rolls and damage rolls on a
successful critical roll against an opponent immune to critical hits
as it is not possible to score a critical hit.