If he is drinking 200ml each time then I would suggest that he probably needs it, not what you want to hear though I guess! My DD used to drink that amount twice during the night and then gradually she started having less and less and then dropped the feeds entirely. This took time though! She now has a small teddy and her favourite blanky which helps her to resettle if she wakes. Sorry don't have much else to suggest, I've never heard of watering down the formula before??

By the way, your little man is gorgeous!