As a DofE Gold assessor myself, and the manager of a Licensed DofE centre, I would agree that 20Kg is excessive. My own bag for my ML assessment was only 18k and that included 30m of rope and a helmet! OK, there was some lightweight kit, but there was an awful lot of "just in case" stuff too, which adds up!
Our own gold candidates generally end up with a bag somewhere around 11-14kg after some real trimming down. Careful choice of food can save an awful lot of weight and bulk.
Now - the water issue. Any centre/assessor/supervisor which restricts the amount of water carried is, in my mind negligent. Yes, it adds to weight and bulk, but is arguably one of the most important things carried. I have heard of assessors and supervisors pouring excess water away, and this was in a 30 degree heatwave last summer. I have no problem replenishing candidates water supplies in hot weather, nor if they have run completely dry would I have a major problem with them buying emergency water in a shop (as long as they didn't come out with a 3 course dinner!). Yes, the 20 conditions of DofE stand, but most important is the care and welfare of the young people in our charge. It is after all a Gold DofE award, not SAS selection, though unfortunately I have met too many assessors in my time who seem to consider it the latter!
The experience should be enjoyable - it is tough, mentally and physically, but I find that good navigation training and the ability to look after each other helps keep the majority of the misery at bay.