moore : good words - "scuttlebutt"
The verb scuttle has a very specific definition, it is to dig a hole in the hull of a ship with the intention of making it sink.
Historically, scuttling has been proven as a highly successful tactic in war. In 1969, the 32-gun, fifth-rate sailing frigate of the Royal Navy, HMS Sapphire, was trapped by four French naval vessels. Naturally, to avoid its capture, the English scuttled the vessel on September 1696. The same was done to surrendered Imperial Japanese Navy submarines in 1946 to prevent a Soviet inspection, and 24 submarines were scuttled.
The noun butt has more meanings than the anatomical body part on which we sit. And, oh do we sit! Derived from the medieval French and Italian word botte, a butt is defined as a wine cask.
So put two and two together, we somehow get scuttled butt, which transformed into scuttlebutt. On a sailing ship trip out to sea, you should know not to use sea water as drinking water - it can be deadly! Thus, you would store your water (L.A.'s finest tap works for us) in a "butt" or cask, which would have been "scuttled" so water can be withdrawn.
IT'S A WATER COOLER.
It's where you gather to gossip, start the rumor mill, and weave stories. So there you have it: scuttlebutt is rumor or gossip.