Yes you can have too much water....anything over 8/9 litres is excessive and can lead to loss of vital minerals, salts, etc and can even leave you feeling rather unwell!
It is true that the more you drink the more you shrink...but keep it to a reasonable level, i.e 4 -6 litres per day.
Well, I doubt I'll be getting to 4l but I'll just keep an eye on it when it's warmer as I have got up to 2l quite quickly! I'm amazed by how much thirstier I feel now when I used to drink very little during the day before. I must go for a wee every hour on the hour though!!!