"DH will only take a sip of water to take his medication, even though the directions on the bottle say to take with at least 8 ounces of water. He says that he was taught that too much water dilutes the medication."
Even if it was true (it's not), the instructions say to take the meds with 8 ounces of water so did it ever cross his mind that it's supposed to work that way? If he believes that the water dilutes the medication, then by taking the medication without the instructed water he's overdosing. Therefore, no matter what he thinks about dilution, failing to follow the instructions is foolish.
"Similarly, I have relatives who say that you should never drink water with meals because it dilutes the food."
This is simply nonsensical. To wit, even if it's true (it not in this case either), why does it matter that your food is "diluted"? Perhaps an argument could be made that you could drink too much and therefore not want to eat enough to get proper nutrition, but you'd have to eat some pretty calorie-sparse stuff to run out of room before you could get enough nutrition to live. After all, whether you eat a hamburger with no water or with a quart of water, as long as you eat the whole burger it's all inside to be digested.