drying up of the water
it probably was an extraordinary or rare thing to happen in the way it did.
Land desicated from water, in fact, is the basis to all Primordial Mound myths. The mound of land appears from the water as it dries up.
According to folk etymology, the name "Kashmir" means "desiccated land" (from the Sanskrit: Ka = water and shimeera = desiccate). In the Rajatarangini, a history of Kashmir written by Kalhana in the mid-12th century, it is stated that the valley of Kashmir was formerly a lake. According to Hindu mythology, the lake was drained by the great rishi or sage, Kashyapa, son of Marichi, son of Brahma, by cutting the gap in the hills at Baramulla (Varaha-mula). When Kashmir had been drained, Kashyapa asked Brahmans to settle there. This is still the local tradition, and in the existing physical condition of the country, we may see some ground for the story which has taken this form. The name of Kashyapa is by history and tradition connected with the draining of the lake, and the chief town or collection of dwellings in the valley was called Kashyapa-pura, which has been identified with Kaspapyros of Hecataeus (apud Stephanus of Byzantium) and Kaspatyros of Herodotus (3.102, 4.44). Kashmir is also believed to be the country meant by Ptolemy's Kaspeiria.
Cashmere is an archaic spelling of Kashmir, and in some countries it is still spelled this way.
I think you should have added this part also:
As a result of the hero's actions, the people named the valley as "Kashyap-Mar", meaning abode of Kashyap, and "Kashyap-Pura", meaning city of Kashyap, in Sanskrit. The name "Kashmir," in Sanskrit, implies land desiccated from water: "ka" (the water) and shimeera (to desiccate). The ancient Greeks began referring to the region as "Kasperia".
Combine that with what you quoted:
Kashyapa-pura, which has been identified with Kaspapyros of Hecataeus (apud Stephanus of Byzantium) and Kaspatyros of Herodotus (3.102, 4.44). Kashmir is also believed to be the country meant by Ptolemy's Kaspeiria.
...and you might get the idea that the oldest and original name was something like "Kashappera".
"Kashmir" is then a later name that evolved from the original name, and it had a nice and fitting Sanskrit etymology with which to explain this later name.