We discuss the description of water and hydration effects that employs an approximate density functional theory, DFTB3, in either a full QM or QM/MM framework. The goal is to explore, with the current formulation of DFTB3, the performance of this method for treating water in different chemical environments, the magnitude and nature of changes required to improve its performance, and factors that dictate its applicability to reactions in the condensed phase in a QM/MM framework. A relatively minor change (on the scale of k(B)T) in the O-H repulsive potential is observed to substantially improve the structural properties of bulk water under ambient conditions; modest improvements are also seen in dynamic properties of bulk water. This simple change also improves the description of protonated water clusters, a solvated proton, and to a more limited degree, a solvated hydroxide. By comparing results from DFTB3 models that differ in the description of water, we confirm that proton transfer energetics are adequately described by the standard DFTB3/3OB model for meaningful mechanistic analyses. For QM/MM applications, a robust parametrization of QM-MM interactions requires an explicit consideration of condensed phase properties, for which an efficient sampling technique was developed recently and is reviewed here. The discussions help make clear the value and limitations of DFTB3 based simulations, as well as the developments needed to further improve the accuracy and transferability of the methodology.