Lack of systems thinking here by almost everyone except the few who mentioned the lost negative entropy. Also the water treatment guys who are implicitly referring to this, of course.
Let's say there are absolutely ideal conditions and the water is 100% recycled. Sure, the water itself is fully conserved, but that's just a partial view of everything that's going on. If you're focusing only on that, you're missing the bigger picture.
The energy to pump the water out, treat it, and/or recycle it is lost forever in the form of negative entropy (energy dissipated), as one poster mentioned — second law of thermodynamics. So using water you don't need is still wasteful, it's just the waste comes in a different form. The second law comes into play in any kind of resource use. Something is always lost to entropy in transforming the resource from one state to another (using it).