Will hydration play a role in calculating lean body mass?

Yes; depending on your method of tracking body fat and lean body mass. Bioelectrical impedance is a method of tracking body fat that occurs by sending a low voltage electrical current through the body. Your muscle is composed largely of water. Since water is a conductor of electricity, the resistance the electrical signal experiences while traveling through the body will help determine what percentage of your body is fat. If for some reason you are over-hydrated or dehydrated, your results will be impacted. If you have just consumed a sports drink, the increase of fluid and electrolytes in the your system will speed up the electrical current and show a lower body fat than what is actually present. If you are dehydrated, the current will pass through at a slower rate and show an inflated body fat percentage. The most important factor when calculating body fat percentage is consistency. If you began your program by measuring your body fat in the morning, then during your reassessments continue to measure your body fat in the morning.