I have had a couple peonies develop mildew, the white powdery stuff, and just ignore it. It will soon be time to dig and divide peonies so it probably would not hurt to just cut them off. My leaves are beginning to die and I plan to cut the stems off next week just before time for the yard waste pickup. Different areas with different climates would have different dormant times. You are correct about watering though. Every time I water the leaves I see an increase in spotting and leaf damage. Others may have different opinions so you may want to ask around this forum. I like to use the leaky bucket technique to water peonies and roses. I have several 35 lb cat litter buckets which I drill a 1/4 inch hole in the narrow side right at the bottom and place it close to the crowns and fill with water. I squirts the water under the leaves and comes out slowly enough to permit soaking instead of runoff. Each bucket holds at least 5+ gallons of water. Beats standing there holding a hose.