I don't think there's anything WRONG with using a water pan in a UDS, but it's just not necessary.
The ECB and WSM all have the bottom cooking grate very close to the heat source. The water pan acts as both a diffuser, redirecting the heat around the outside of the barrel and then up, so that the meat on the racks doesn't get BLASTED with direct heat. It also introduces steam, which (as you know, is created at 212 degrees - the boiling point of water) helps keep the temps more constant in the cooker. It's thought that the steam keeps from bigger fluctuations in temps.
This is the same reason some folks use a drip pan (usually with water) in a kettle grill, for moisture as well as protection of the meat from direct heat.
Since the UDS typically is designed so that the cooking grate is at least 24" above the heat source, it's not necessary to protect the meat as much since that distance allows the meat to have direct heat, but it's not close enough to damage the meat.
If you use a water pan in the UDS and you like the results you're getting, don't change a thing.
I've had a UDS for years and have never used a water pan. I've used a diffuser when really loading it up with a lot of meat and cooking at higher temps, but this is more to avoid that nasty grease aroma than anything.