I can't imagine timeouts "working" for kids under 3 years old. I'm sure there are outliers of course...there are outliers for every neurological milestone.
This is a biological thing, mama. The parts of the brain that control impulse and decision making are not developed fully by 2 years old...depending on what expert you read...some say it's not fully developed until as late as 5 years old. But I imagine the brunt of it is newborn-3 years.
In other words, even if they understand concepts such as hitting hurts another person, or dumping out water is against the rules, they literally don't have the brain function to stop themselves. Although I suppose some forms of severe conditioning might create unique neuropathways that compensate (think the Pearls). And I'd be terrified to do that to my child...
Anyways, you wonder what to do...makes sense. I wonder that every day.

IMO the goal is to head off the crisis before it happens. If you watch carefully, you catch cues before it's too late. For example, if DD is having trouble communicating what she wants and I start offering to many choices, she gets really frustrating and will fling whatever I give her. If I hand her a banana, she tosses it to the ground, then plops down and starts crying.
I don't see what a time out would do for her in this situation anyway. I think maybe I need a time out for overwhelming her and pressuring her.

When this happens, I just say something such as, "Uh oh! Little banana got hurt when you tossed him on the ground. Help me pick him up and put him on the table, please."
Whenever the situation involves hurting another person, I make sure to direct all attention to the victim. This has been really effective for me. I don't know if that means it will work for everyone but it's worth a try. For example, one time DD was reading a book and something bothered her (who knows what...it's like they are teens or something) and she flung it at DH. I immediately rush.....right past her to DH and hugged him and gave him an "owie kiss" and asked him if he was okay, etc etc. After about 30-40 seconds of doing this, DD slowly came over to us and stood there, waiting for us to acknowledge her. I kept gushing over DH, then about 10 seconds later she walked over to DH and hugged him. At that point, I acknowledged her and said, "Thank you for hugging daddy. That book really hurt him! Next time if you are angry, just set it down nicely like this" and I showed her how to set it down.