Water IS free, unless you ask for bottled water.
The server was supposed to ask you if you preferred the bottled water over tap water, which is filtered at AKL (most restaurants in WDW filter their water as well. Its the water fountains and tap water at the rest of the resorts that have that central Florida sulphur taste.
Once upon a time, WDW waiters were free to add extra coffees with dessert and bottles of water and basically run up the bill with little extras to run up their tip because these costs were “magically” eaten and the guest was never charged extra.
Sadly, this ended when the Magic Your Way packages were introduced in 2005, along with frequent free dining offers.