You have a nice little climb out of 603 up to the Highlands, but the first shelter you come to, Old Orchard Shelter, has a great spring that is usually pretty reliable. Water in the Highlands is a little harder to come by, the springs at Wise Shelter and Thomas Knob were flowing but slow when I was up there in July. The spring at the end of the Springs trail was flowing nicely but it is 1 mile off the AT. The spring at Deep Gap was flowing great as always, it is a great water source as is the spring by Whitetop Mountain (it was really flowing well). I turned around at Buzzard Rock so I don’t know what the springs are like this year past that, but I didn’t have any problems through there late last summer.
While there are a lot of trails in the area, I don’t feel that any of them are particularly better than the AT, though the Pine Mountain Trail is nice. I would stick to the AT personally.
There are all kinds of great places to camp in the highlands, along Wilburn Ridge or up close to Thomas Knob are favorites of course they can get crowded on weekend. Deep Gap is a really nice place, but they have it closed for rehabilitation now (apparently it was too nice), but there is a nice spot on a blue blaze on top of the hill just past the Gap. You could also camp at Elk Garden, but it is a little close to a road for me. There are some nice spots in the woods before you skirt Whitetop Mountain, as well as a nice spot by the spring after you cross the FS road.
For the best up to date water info, you might check over at Whiteblaze.net, as that is the best place for AT trail conditions. If you need a shuttle, the poster Lone Wolf, shuttles and is affordable. I recommend parking by the old mill across from the post office in Damascus.