after wasting around 2 hours trying to figure out what i was doing wrong, i feel the need to save others from wasting their time.
to get the hydrogauge, im pretty sure any rod/lure will work. i used both a bamboo rod and a glass fiber rod, because at first i didnt think the bamboo rod would work. i used insect paste as my bait.
LEARN HOW TO FISH! the reason i wasted so much time was because i had no idea how the new fishing system worked, so i would randomly just push "enter" when i thought it was a good time (i know, i know, loser, right?)
how to fish: go to the waters in Nashmau (thats where i fished, but i guess at any ToAU town you can get it, too), cast your line, and wait til you get the message "something has caught the line" or whatever. the 4 and 6 keys on the numbers pad represent a direction, 4-left, 6-right. your character will pull the rod to a certain direction, so press the opposite direction's button to deplete the fish's life (seen where a mob's health appears). when its life is depleted, press enter, and there you go! you got a hydrogauge.
so now if you are confused on how to get a hydrogauge....you wont be anymore! and now you know how to fish :p
good luckkkk.