Responses from collectors - please drop a line to glassmaster@pre-pro.com to have your comments added:

bulletFrom Gary:  I think it means, don't fill the glass with whiskey right to the top because too much whiskey is not good - rather the opposite of your suggestion that too much water ruins the drink. You may be right, of course, but I think the legend may be saying, don't drink too much. I guess one thing I am not sure of is, did people typically pour water in the whiskey in the shot glasses (which are relatively small and not highball glasses of course)? Or did they drink the whiskey neat? I would have thought the latter, mostly, hence my theory, but I am not sure! 
 
bulletFrom Alice (originally from her grandmother):

"Lest the kettle boiling B
Filling the teapot spoils the T!"

-  this one sounds like a winner to me! But why have it on a shot glass???! (Ed)