Combine the water, blood oranges and lemons in a large Dutch oven over high heat and bring to a boil. Reduce heat to low, allow the liquid to reach a gentle simmer and then carefully cover the pot with aluminum foil. Crimp the edges to seal tightly and then cover with the lid. Simmer for 3 hours, or until the fruit can be easily pierced with a skewer. Remove the pot from the heat and allow it to cool overnight at room temperature.
Preheat the oven to 250 degrees F and adjust the oven rack to the middle position. Place sugar in a roasting pan, cover with foil and place in the oven to keep warm.
Remove the oranges and lemon from the liquid and set the pot aside, reserving the liquid. Quarter the fruit and use a spoon to scoop the pulp and seeds back into the pot, saving the peels.
Mash the pulp into the liquid with a potato masher and then bring to a boil over high heat. Boil for 10 minutes and then strain the liquid through a fine mesh strainer over a large bowl, pressing the solids with a spoon to extract the liquid. Discard the pulp and return the strained liquid to the pot.
Place a small plate in the freezer. Slice the blood orange and lemon peels into thinly diced pieces (I like to leave some slightly larger chunks). Place the peels in the pot with the liquid and bring to a boil, then remove from the heat. Stir in the warmed sugar until completely dissolved, 1-2 minutes. Return the pot to medium-high heat and simmer the marmalade, stirring occasionally, until slightly thickened and darker, 30-45 minutes.
To test if the marmalade has set, place a small spoonful on the chilled plate and freeze for two minutes. If the marmalade gels in that time, it's done. If not, simmer for an additional 5-10 minutes.
Transfer the marmalade to jars with tight fitting lids and allow to cool to room temperature, then cover and refrigerate. Marmalade will last for 2 months.