Please could anyone tell me, if this sentence is correct English (meaning ~ you can drink it, but you can also not drink it)?
And also if the other English sentence ("You can drink water, but you can also pass it.") has two different meanings:
first meaning: pass water ~>urinate
second meaning: pass water ~> hand water
???

Thanks in advance :)!

Second question first - Yes. For me, at least, I'd tend to read it as probably being a pun (intentional or not) or part of a joke.

First question - probably correct English. But the sort of correct English that leaves you going "Eh? What was that about?".

Is the German some sort of proverb?

Oh, great =))).
To anser your comment on the other English sentence:
No, the pun wasn't intentional. But I love it, because:
The German sentence ("Man kann Wasser trinken, man kann es aber auch lassen.") is no proverb, but a pun. It has two different meanings:
1. ~ you can drink it or not drink it.
2. ~ you can drink it or urinate it.
So, it's really funny that one of the 2 English translations has also two different meanings, but not the same ones as the German one :D! (the German one can NOT mean "to hand it..."!)

I hope my explication wasn't to complicated^^...

Well, if anyone didn't understand the graph structure of tatoeba before... here's a great example why it's so important to distinguish between direct and indirect translations^^. Did I already mention that I love it :D?!