I doubt very much that the dill is the problem. IMO opinion most of the 'companion plant' pronouncements are highly suspect apart from a small number of genuinely allelopathic species. I think the key might be in your words 'all other plants are fine, so not a watering issue.' Cucumbers and peppers have different water requirements so the assumption that because one lot of plants is doing well there isn't watering issue is erroneous. Check the water needs for each of your crops individually and give them water accordingly. Don't treat them all the same. Good luck. Try the Vegetable Forum if you have further trouble with your peppers.

Check the interior stem of your dead peppers. There is a worm that bores out the internal tissue and I suspect this is your culprit. You can save your pepper plants by cutting away the dead tissue. The base of the plant will send out new growth and you should be able to still have a crop of peppers. This year I have had quite a few of my pepper plants affected by these nasty borers. However, I have new growth that is doing well and the plants look great again. I have never noticed dill to adversely affect the growth of any neighboring plants. Most of my dill self-sows all over the garden and I love its presence.

The reason why dill is said to be a bad companion for tomatoes is it is thought to attract the tomato hornworm, which if it was on your pepper plants, you would likely see it.

That's interesting. We don't have them here but I have read that their larval foods are all Solanaceae, so why would Dill attract them? I have actually read the exact opposite: that Dill and other Umbellifers attract the wasps which parasitise THWs and therefore you should deliberately plant it nearby. (But that would only be true if the Dill flowers.)

I haven't seen solid evidence for either theory. Basically there are a lot of statements maintaining one or the other view but no actual research quoted. On balance I'd ignore it and put the Dill wherever you like.

I had just seen that statement and filed it away. Most of the time when I see anything related to companion planting I try to see if there is any reasoning listed with it and make my decisions from there. For instance, the oft repeated warning that dill and fennel will cross (which is of course not possible). However, I have found hornworms on things other than nightshades. At my house I have found them munching on a flowering plum tree and on peas.

I agree though, I generally try to plant things just about anywhere I have space and give little heed to the notion of companions.

"At my house I have found them munching on a flowering plum tree and on peas. ..." I know nothing about N American lepidoptera but moths usually are pretty specific about their larval food plants. A bit of Googling should bring up the kinds of caterpillars which would be eating plums and peas.Are you sure they were tomato worms - maybe some other hawk moths?

Here is a link that might be useful: Tomato horn worms

I suppose it is possible that it was another hawk moth caterpillar. They looked generally the same at the time and my treatmet of them is the same too, pick them and throw them to the chickens.