I didn't have time to read your whole post, but it seems that your main concern is that the functional forms of responses might shift with treatments. There are techniques for dealing with this, but they are data-intensive.
To your specific example:

G is growth W is water T is treatment

library(mgcv)
mod = gam(G~T+s(W,by=T))
plot(mod,pages=1,all=TRUE)
?gam

The last decade has seen a ton of research into semiparametric regression, and these beefs about functional forms are getting more and more manageable. But at the end of the day, stats is playing with numbers, and is only useful inasmuch as it builds intuition about the phenomena under observation. This in turn requires understand of the ways in which the numbers are being played with. The tone of your post indicate a willingness to throw the baby out with the bathwater.

I didn't have time to read your whole post, but it seems that your main concern is that the functional forms of responses might shift with treatments. There are techniques for dealing with this, but they are data-intensive.
To your specific example:

G is growth W is water T is treatment

library(mgcv)
mod = gam(G ~ T + s(W, by=T) )
plot(mod, pages=1, all=TRUE)
?gam

The last decade has seen a ton of research into semiparametric regression, and these beefs about functional forms are getting more and more manageable. But at the end of the day, stats is playing with numbers, and is only useful inasmuch as it builds intuition about the phenomena under observation. This in turn requires understand of the ways in which the numbers are being played with. The tone of your post indicate a willingness to throw the baby out with the bathwater.