I do this occasionally. I have a helles kellerbier on tap right now that I brewed 4 gallons of and diluted to 5 and I'm glad I did because it's a freakin' delicious beer. I brewed 4 gallons of 1.060 wort, diluted with a gallon of near freezing RO water to get around 1.048-1.050 wort. And, yes, hop it to the 1.070 wort because diluting it will lessen the hop utilization.
I normally brew 4 gallon batches inside on the stove in a 6.5 gallon kettle. But lately, I've been wanting to make it 5 gallons but don't have the capacity for it, so diluting with a gallon of RO works.