Water regulates heat by the way water flashes to steam vapor (ie, physics). Water wants to stay at a liquid. It will flash over to a vapor at 212* but to make that phase change it takes a lot more energy than say to go from water at 211 to water at 212*. The energy is coming from the heated air in the smoker body. Now water also wants to try and fall back to the liquid state unless there is a lot of heat in the air volume to keep it as a vapor. So the water and water vapor are basically sucking heat out of the air in a smoker with a water pan. This tends to keep temps in that magic smoking low and slow range. Also with a temp over shoot, when you choke back the air flow to the fire, the water/vapor will also pull the temp down quicker than a pan filled with sand or a clay pot base.
Another purpose of water or sand or clay pot base in a smoker (
WSM in particular) is to serve as a heat sink. They heat up and if you open the lid to baste, turn the meat, etc... the air temp will drop drastically pretty quickly. Your thermal mass (the water, pan full of dry sand, clay flower pot base, etc...) is at the prior pit air temp and will radiate heat. Think of a concrete or brick wall that is in the sun all day, and late at night it is still very warm compared to air temp if you feel it. That is how a thermal mass works. Just like that warm wall heats your hand on a chilly night, a thermal mass in a smoker helps bring the temp up and smooth out the spikes (although on a much hotter level). The main drawback to a dry water pan filled with sand or a thick clay flower pot base is they are a thermal mass only and do not really pull any energy out of the heated air like water (as there is no phase change like with water). If you use a thermal mass only, it does take a little more experience with air flow and vent control to keep the temp stable, but once it's stable it is pretty much going to stay there. But if you over shoot, it takes a lot longer to get the temp back down as there is nothing to suck heat out of the air and the thermal mass is also heated to the overshoot temp. That's why water in the water pan is the way to go until you have some smokes under your belt, it's more forgiving.
That being said, there are some smokes where the added moisture in the air column is beneficial to the product being smoked, but in the end it is a personal choice to run water, sand, clay pot, steel plate, etc... once you have experience with the
WSM. Also a power draft like the BBQ Guru will keep from the overshoot and is a great tool when paired with a clay pot base (I run that combo on nearly all my overnight smokes of pork butts or beef clod).
So, I would stick to the water in the pan for now and when you have become more familiar with the way the smoker performs, then try a dry mass as a heat sink.
