The perturbation induced by a hydrophobic solute on water dynamics is essential in many biochemical processes, but its mechanism and magnitude are still debated. A stringent test of the different proposed pictures is provided by recent NMR measurements by Qvist and Halle (J. Am. Chem. Soc. 2008, 130, 10345-10353) which showed that, unexpectedly, the perturbation changes in a non-monotonic fashion when the solution is cooled below room temperature. Here we perform and analyze molecular dynamics simulations of a small paradigm amphiphilic solute, trimethylamine N-oxide (TMAO), in dilute aqueous solutions over the 218-350 K temperature range. We first show that our simulations properly reproduce the non-monotonic temperature dependence. We then develop a model which combines our previously suggested entropic excluded-volume effect with a perturbation factor arising from the difference between local structural fluctuations in the shell and the bulk. Our model provides a detailed molecular understanding of the hydrophobic perturbation over the full temperature range investigated. It shows that the excluded-volume factor brings a dominant temperature-independent contribution to the perturbation at all temperatures, and provides a very good approximation at room temperature. The non-monotonic temperature dependence of the perturbation is shown to arise from the structural factor and mostly from relative shifts between the shell and bulk distributions of local structures, whose amplitude remains very small compared to the widths of those distributions.