That is powdery mildew on your squash plants. If the soil is bone dry while the pepper plant is wilting yes it is under-watering. But the same wilting affect can be the result of other problems including over-watering.

Are the leaves slowly shriveling and then the plant dies? If so, then I agree with DMForcier... damping off fungus. Prevention? Let soil dry out almost completely between waterings. Sprinkle cinnamon around seedlings. Water with 1 part Hydrogen peroxide(3%) to 4 parts water every couple weeks until plants get past the critical stage of this possible affliction -- 1st 6 weeks or so after the 1st set of true leaves. Good luck and any more questions, just ask. Kevin

I tried to grow some, but I did not succeed. Just as well, I'm a heat wuss. However, Elery's son lives in California and says he got 500 peppers from 4 plants. He's making hot sauce, but also said he ate a tiny bit of the tip of one and was in such pain that for 20 minutes he wondered if it was ever going to stop. His did well: I have a recipe for a peach habanero hot sauce that might moderate the heat a bit with the fruit, or perhaps hot pepper jelly? A dehydrator would be a good idea, but I'd dry them outside. Just the habaneros I dry get done in the garage so the fumes don't drive us out of the house. I'm betting ghost peppers would be worse. They are expensive to buy, do you know any pepperheads that would like them, or their seeds? Annie

Watering once a day is way over doing it with the water. The leaves are turning yellow from the nitrogen being pushed back into the soil in a last ditch effort to give the roots some oxygen. Stop watering for at least 3 to 5 days. The leaves on the plant are at some point going to fall off. Do not start pumping every fertilizer, and home remedy into the plant. All you need to do is let it dry out. Then water only when the plant needs it. The plant will take anywhere from a few days to a couple of weeks before it starts to show any improvement. Over watering is probably the most common mistake people make. Next is overdoing things to correct the problems that the over watering created.