Exactly. In a popular magazine article about skin care, I read that though water was a great hydrator for the body, it was not what one should turn to for acute dry skin issues. The benefits of sufficient water intake are numerous, but include proper care for our vital organs and assistance with digestion. And without water, we will die.
I know from my work in health care that the skin can be used as a test for dehydration. Doctors or nurses may pinch the skin on a person's forearm and watch to see if the skin goes immediately back in place or puckers for a moment. Go ahead, try a little pinch on your arm....
Being dehydrated and having dry skin however, are a little different. In the article I read, it was suggested that the best care for skin was a moisturizing lotion BUT the better lotions have fatty acids, even cholesterol, in them. Apparently, (and a bit of Internet research confirmed this) we have surface lipid on our skin (lipid is a fat - including triglycerides and cholesterol) and if it is depleted, the lotions can help replenish. It was also said that this lotion based cholesterol would not enter our blood stream - so that is cool.
Look at your labels, of course cocoa butter contains lipids as do lotions with stearic acid, or probably any "acid" words. There are oils in plants, plant sterols are lipids, but also know that some come from animals (esp. most stearic acid), so if you are a vegan, you might watch out for your lotions. I am guessing that "not tested on animals" doesn't mean they weren't made from animals.. eek.
I found something positive to say about triglycerides and cholesterol.... but no where did I read that trans fatty acids were essential to good skin, so they are still EVIL.
By the way, other environmental factors can effect ones skin. These include sun, wind, cigarette smoke and even hot water. (in the winter it is possible to bathe every other day and still keep your friends - unless you are getting your daily moderate to vigorous exercise and sweating alot)