I am canning in pint jars (larger than I usually do) and at the end of canning I discovered that the water had boiled down to about an inch below the tops of the jars. I'm adding water back and reprocessing, but is that ok? On the flip side, is it even necessary?
Yes, reprocessing is okay, and it's probably a good idea. Steam doesn't necessarily transfer heat as well as boiling water, so if you end up with too little water, the odds of unsafe results increase. To get the safety out of the process, you have to have followed all the steps, and that includes keeping the water level high enough.
The most obvious way things could fail is simply by not getting good seals. But you also didn't heat the contents well enough, and that's part of the processing too.
For waterbath canning, the water must remain ABOVE the tops of the jars for the ENTIRE process time. In this case to be safe, you must add more water (to at least an inch above the tops of the jars), bring it to a boil (if the additional water cooled it down) and then restart your timer. Simply continuing the timer with added water would not be considered safe canning practice.
It is important to note that a sealed jar is not necessarily a shelf stable jar. Jars will seal from small changes in heat. This does not mean that the product is safe. To be assured of a safe and shelf stable product you must be careful to stick to the processing guidelines.