Hello Evie,

Watering every 3-4 hours may be a little much. Especially depending on what time  you water for the last time of the day. If the grass is not dry by dark, the chance of fungal disease increases. Watering two to three times a day is recommended for freshly seeded lawns.  Always water early enough in the day to let the grass plants fully dry before nightfall. https://www.canr.msu.edu/resources/establishing_a_new_lawn_using_seed_e2910

That cottony growth is consistent with the fruiting bodies of dollar spot disease. Dollar spot usually forms when the grass plants are stressed and nutrition is low.  Did you put down a starter fertilizer? It may be time for a light application of nitrogen.

Now for the fungicide. Make sure it is labelled for use on lawns and that it treats fungal infections such as dollar spot. There is no specific time of day to apply it, but since it is best watered in, earlier in the day (before mid afternoon) would be better so that the foliage can dry before nightfall.

Hope this helps.