Less water is required of the body when not utilizing digestion/elimination (as is the case when in a fast). Contrary to intuition, you actually do 'need' less water on a fast than when eating. It makes sense when you consider the laborious task that is digestion, along with consideration of the salts that we intake when eating (which, as we all know, when you eat salty stuff you become very thirsty).
Dry fasting is said to increase the elimination of toxins from the body. I have no good references for this though, and I am sure that it is something I have read on this forum over the past few years. There are certainly others here whom will have more information than I.
Shelton discusses this very briefly in one of his books, and says that the idea that increased water leads to increased toxin elimination is undocumented and, in his opinion, false. What excess water does do, however, is water-log the cells and body tissues (not really a problem unless you live and die by the numbers on your scale...which I suggest never stepping on).
WATER DRINKING DURING THE FAST (scroll halfway down on this page)