I think it all depends on your goals. If your first starting out and are at a higher bf% (I would say over 20%) then definitely stay away from dairy and stop trying to bulk until you can get your body fat to a respectable level. When you are at the point where you feel your bf% is low enough, which should be under 12% IMO, then you are able to get away with a lot more as long as the rest of your diet is satisfactory (for bodybuilding purposes).
Personally, I use water regardless of my bf% because like everyone else in this forum I'm OCD when it comes to diet and workouts. Some people don't care if your fuel tastes awful as long as it produces the results you are after and I am one of those people. Hell, I would probably eat dog shit if someone could convince me it made me more anabolic.