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Dunno about the used bait mechanic (I always thought it was just random).
As far as identifying what type of water you're fishing in... you pretty much have to use the visual clues. Lakes, Rivers, Oceans, Foul (swamp) are pretty much easy to identify. It only gets tricky for the Foul water, but as a general rule if the water isn't clear, then it's foul. Swamp water, Yellow water (from sulfur pools), Coldharbor, etc..
I've been fishing on and off since launch, and I usually use Google to find a list. I've never caught used bait when using the right bait for my location. I could be lucky, but I think that's a good sign you're doing it right.