Any top up will dilute your beer. It will have less flavor per mouthful and lower alcohol. The question is it enough to make a difference. I never top up more than 5% of the original volume unless I was not paying attention and had high boiling loss and then a higher gravity beer than planned. Then I will top up to bring the gravity back down to my planned gravity. But you could probably go to 10% without noticing too much. But think if it. If you had a 5% beer going there and top up 10% of volume you now have a 4.54% beer. That is definitely approaching the significant level. If you have an 8% beer and top up 10% of original volume you have a 7.27% beer.
Of course it's possible. It depends on the specific circumstances. For example, if you are planning on having a starting gravity of 1.055 and you end up with 4 gallons at 1.055 and then add 1 gallon of water, your starting gravity will be considerably lower and "overdiluted" in reference to your recipe. It doesn't even have to be that extreme, though. You could have 4.75 gallons at 1.055 and you add 0.25 gallons of water, and you've still over-diluted it since you were shooting for a starting gravity of 1.055 and your 0.25 gallons of water got it below that, even though you probably won't be too much below your target. If you're talking about "too much water = too little malt/hop flavor," that really depends on the recipe. I mean, you could probably do 0.5 gallons of super concentrated malt and hops and then add 4.5 gallons and still have a decent gravity and "reasonable" IBU, but it would be super diluted from what you originally boiled. Whether it would taste okay or not... I'd have to try it out to say for sure (since I haven't done anything like that before), but I'd imagine you could match your values in your recipe... :/
Very case-specific, but yes, it is definitely possible.
It is especially possible with hops. Considering an extract batch, where you know you will get enough sugar per the recipe, you will not dilute if you go to the correct volume. (Keep in mind ANYTHING can be diluted, so hopefully I am answering the intent of your question.)
HOWEVER, hops are a different story. There is a practical limit to the amount of hops that can be in your beer. I've heard it's around 100IBU. This is why you will often see *calculated* IBU in a recipe. You can add 50 oz of hops to a 5 gallon recipe and call it 2000 IBU, but in reality (in laboratory measurements, etc.) the IBU are not that high.
Let me put it this way:
5 gallon recipe with 10lbs of extract would be very similar (i.e., undiluted) whether 2.5gal post-boil topped up to 5gal or 5 gallons post-boil. I'm ignoring caramelization and other potential malt effects for the purpose of this discussion.
BUT a 5 gallon recipe with 10 oz of hops would be quite different if you topped up half the volume vs a full boil.
All that being said, topping up 5-10% to get to the recipe target volume is probably fine and likely not particularly noticeable unless it is a somewhat extreme brew (requiring ultra high IBU or original gravity). Also note I only talked about extract because it excluded mashing effects. The same arguments are valid for all grain, so far as I can tell.
I brew "Maxi-BIAB" style: stove-top BIAB with a 4-gallon kettle, ending up with roughly 3 gallons of worth (more concentrated than my target OG), and then top it with 1 gallon cold water. Of course all my calculations take that into account (through Beersmith), and I usually hit my target OG pretty accurately. So far, I like my process. It is quick, efficient, can be done inside without problems, and haven't add any off-flavor issues (I do add a bit of crushed Campden tablet to my top-off water).