Similar topic:

http://www.gamesas.com/index.php?/topic/1120617-canteens

press A near water source.

I believe that in hardcoe mode, the canteen will not be a 'useable' item, like a consumable, but rather like the Food Sanatizer in Fallout 3, where it will decrease your dehydration rate by a percentage (maybe 5 or 10? just a guess).

Wish we had real answers for things like this.

Waiting for my strategy guide to come in the mail...

Playing hardcoe mode, every once in a while it tells me "you take a sip from your trusty Vault 13 canteeen" or something like that, but it doesn't seem to do anything.

Don't ever see an option to fill it, doesn't seem to need filling, doesn't seem to affect my hardcoe H2O requirement (in fact, my H2O seems to increase more than my FOOD does).

It instarefills each time you drink water. any water

People will die of thirst long, long before they die from starving, especially in what is essentially a desert.

'P', of course.

[hope everything ...comes out ok]

It seems to be always full of water. No need to refill.

But I can't figure out What the automatic 'drink from canteen' does? Does it help health generation?

You keep the canteen on your person and your character automatically drinks from it from time to time to lower dehydration. No need to refill it. It's unlimited.