I think the water is for cooling, not for the product...
I would suggest doing some research on PID algorithms (http://en.wikipedia.org/wiki/PID_controller), since you will likely need something like that to control the temperature/feedback.Of course, I'm not sure how much automation you will be able to achieve, given that the still will require, yeast and a food source to be added, beyond water.
If for cooling, you really don't need an automated valve...
There also exist gaseous alcohol sensors:http://www.sparkfun.com/products/8880
also found this thread:http://www.homebrewtalk.com/f51/digitial-hydrometer-sensor-267405/
ive been reading up on PID, the page you given me and others. But im not sure why i need it? A thermister will just out a change in resistance that i could measure with analogRead, i can map that to a temp range and use in my program. would that not be correct?
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