I have well water so haven't had to mess with this but I don't think the recommended amount is based upon final batch size. Between, absorption and boil off rates much. more than 5 gallons of water is used to produce 5 gallons of beer. I. would certainly err on the side of caution as @radagast prefers to do.
I can't say I know what "over carbed" tastes like? I suppose increased carbonic acid is somewhat acrid? That would lead me to believe it's either the chloride in your water or incorrect pH in the mash causing tannin extraction.
If you're BIABing over crushing shouldn't be much of an issue but could cause an increase in trub.