As OP has already established, there's a phrasal verb to water down (literally and figuratively, to dilute). But that's not relevant to the cited usage here, where it simply means to [make] wet. Per my comment, this is clear from the context, which explicitly says that the roads were dampened to reduce the dust.
OP is correct in supposing that down in this instance simply refers to the fact that the water is splashed down[wards] onto the road. But I think it's fair to say the semantic content of the word is negligible here, since the meaning should be just as clear even if it's omitted.
Taking a different verb, it can be seen that [optional] prepositions are often added after common verbs of action where the [minimal] semantic content of the preposition can be largely ignored...
He ate his tea in a hurry, brushed up his jacket, and started off.
The man lifted himself off of the ground, brushed off his jacket and walked away.
He stood before the mirror while his valet brushed out his jacket.
In those examples, native speakers would be unlikely to register any difference in meaning if those prepositions were transposed - or more importantly, if they were omitted altogether.
In my examples, to brush up can sometimes be a "phrasal verb" (to review; refresh one's memory) - but that clearly doesn't fit the context, so it can be discounted.
My advice in such contexts is to consider the possibility of a phrasal verb usage, but if that doesn't quickly suggest a credible interpretation, assume the preposition isn't particularly significant. Often it'll be an almost random choice (but don't add such prepositions yourself unless you're familiar with the usage).