That is the original wording of the question. As water is added, the concentration will go down. However, water is also a reactant in the equation and will cause a net forward reaction (because it is an equilibrium reaction). So, there is a net increase in the amount of NO2- but the concentration will decrease because more water is being added.
Reaction rate (I think) refers to amount of successful collisions per second. My teacher believed that decreasing the concentration of nitrous acid would reduce the number of successful collisions. However, aren't the water molecules ubiquitous in the container. As such, shouldn't the rate of reaction (number of collisions per second) be the same as before water was added.