I realize that this is just going to muddy the waters, but since I use a Weber kettle, maybe the rules are somehow different than with a UDS or other method- I've had better smoke flavor when I've used a water pan, using the indirect/bricks-down-the-middle method of smoking and BBQ'ing. Without it, the heat's been less stable, and the meats have been drier. I still get a nice, crisp finish on chicken, and a decent finish on red meats and shioyaki salmon (salt-broiled and smoked, Japanese-style) with the steam, so I'm sticking to it. As to the sand, I'd guess it probably works the same way as it does on a beach on a hot day- sand's great for absorbing and holding heat- traps and reflects it. I can see where it would be a great stabilizer for temperature.
~Weber OTS~Charbroil 2-Burner~antique Luhr-Jensen Lil' Chief~