Water in the water pan will increase smoke retention on the meat. It has been proven so. Water also act as a heat sink, as does anything else you put in the water pan like clay, sand, lava rocks, bricks, etc. A heat sink will help stabilize temps but not everything will help keep temps low. The physical properties of water helps keep temps low. Anything else will help keep temps low initially, but will eventually heat up making lowering temps difficult.
For fuel efficiency and responsive temp control I dry smoke 95% of the time in my
WSM with nothing in the water pan. I got to where I could control the temp range plus or minus 5F using all four vents. I use a drip pan to keep things out of the water pan that could burn and make yucky smoke. The water pan is just a heat deflector to me. I found that by matching the top vent to the lower vents I could control temps quite nicely. My formerly leaky
WSM liked to run about 260-270F, but by closing the lower vents down to about 1/8" and the top vent to the same, I could hold 225F-240F quite nicely.
I've recently installed the Nomex gasket kit on my
WSM to stop all the leaks. It did exactly that. Like wow. I'm controlling temps nowadays with the top vent and a BBQ Guru which turns the
WSM into a set and forget at any temp desired.