I always thought the definition of Scoville unit had to do with how many
dilutions it took to make heat imperceptible. Never heard of the sugar
thing, which might perhaps be an alternate way of determining? Though
why a more complicated way would substitute for the easier way doesn't
make sense to me.

The sources that say stay away from water rely on the fact that as
capsaicin is insoluble, all water would do would be to spread it around.
That ignores a couple of issues, most notably what happens to the
receptors themselves when treated with any substance of a sufficient
coldness.

The East Coast Grill used to serve ice cream (for an inflated price,
as I recall) as an antidote during its Hotter Than Hell Nights, the
cold numbing the receptors and the fat helping carry away the
capsaicin.