Yes this is a real danger if you drink too much water – it disrupts the electrolyte balance in your cells, they expand till they burst and hey presto you are dead.
This is the actual cause of Leah Betts death as I recall – water intoxication
http://www.urban75.com/Drugs/drugxtc1.html
http://www.ravesafe.org/otherinfo/leah_betts.htm
To avoid water intoxication when drinking large amounts of fluids follow the advice below:
They should drink water or soft drinks with salt added at the rate of two teaspoons per litre or isotonic sports drinks. If taken in excessive amounts these could lead to swelling in the body tissues but would not cause swelling of the brain because the salt would maintain plasma sodium levels.
“Young people going to raves should take a two-litre bottle of pop with four teaspoons of salt added. It can be water or pop, flat or fizzy, anything they like. It doesn’t taste too salty.
“It is not realistic to rely on young people saying ‘No’ to drugs. There is no way we are going to stop them using drugs. We have to limit the harm drugs can do.”
