I recently traveled in Bavaria. I was struck by the prevalence of place names ending in -au, like Donau, Passau, Oberammergau, and Dachau... I looked up the dictionary, and found the word aue which according to Langenscheidt means "pasture, meadow". Is there any connection between -au and aue?
The examples you give are actually of different origin. "Au" as you have stated correctly is a high German (i.e. southern German) variant of "Aue" derived from old high German "ouwe", which denotates a lower place near water. But in case of Oberammergau the ending is actually "Gau", which is derived from old high German "gouwe", which means something like area, territory or governmental district.
And the name Passau seems to be derived from roman "Batavis", which was a roman name for a germanic tribe. How the derivation process changed "Batavis" into "Passau", I don't know.
De.wikipedia has an article Ortsnamen auf -au. Latin aqua meaning water is related with river names having the second part Ach, Ache or with place names ending in -au. Aue is flat grassy terrain beside a river.