Formally, both mods work at the same time, but there is a problem with recipes. While MI registers the recipe for smelting a bucket of water into a bucket of steam, Dehydration register the same recipe but with the output of a bucket of clean water. For example, when both MI and Dehydration are installed, first the bucket of water melts into a bucket of clean water, and then the bucket of clean water already melts into a bucket of steam. If Dehydration is missing, the usual recipe for melting a bucket of water into a bucket of steam is registered.

Dehydration source