I think you should always be in a positive water balance. IE, your taking in more water than you are excreting. Depending on your individual body, the temperature, humidity, activities, and some other variables - The amount you drink will vary. Summer in the desert will require you to consume much more water than the winter. I try and drink enough water so that my pee is a hint of clear.
If you are not drinking enough water, your body will take that water from other areas of your body, muscles etc. It would be hard to gain muscle when your not drinking enough water.
yep. Water intake is a pretty individualized thing. Depends on a lot of factors, like Jocques said. Just because you may only need 64 ounces of water a day doesn't mean someone else doesn't need 128 ounces.