The only way this could work is if you have a reeeaaally good filter in between the tanks.
The problem is contamination. Personally I'm a little surprised he can even get away using normal city water, b/c it is anything but "pure".
In a real metrology lab the water would run through a deionizing purifier before use. This way you know the actual density of the water - no stuff in there. I certainly hope they already have *some* kind of filtering. We've seen municipal water have as high as .1% variance in density from true. Yikes
with re-using the water, there's no telling what you might be transferring from one container to the next, this could create a safety situation for teh user of the tank. PLUS if the density of the water is not 1.00000 then the results of a pressure test are not really valid. After running the same water through several iron tanks you might have contaminants.
Now all that can be fixed with good filtering - but that slows down your flow rate. Although - again - the size we're talking about is not huge. Even two 20 gal tanks should be plenty. You use water from one while the other one filters out. Change out the water in the evening when you go home and you have all night for the temp to settle.