Kevin,
Here are answers to your first two questions. I can't help with the third...
1. I used to use water-bath development (with HC-110) for contractions for sheet film, mposty Tri-X, and BPF-200. I got up to N-3 using this technique. Many maintain that modern films, with thinner emulsions, do not respond as well to this technique (which is essentially a compensating development method) as the older, thicker emulsion films. This may be, as I have never used any of the really older emulsions. However, I found the technique viable for reducing contrast with the films mentioned.
However, I now use other techniques (usually pre-development bleaching) for contractions as I lose less film speed that way. I would not recommend water-bath developing for "normal" development. Its main purpose is to deal with excessive contrast, and this at the expense of some film speed. To do this, one needs less "in-the-developer time" than normal contrast would require. Although one could simply give lots of cycles until one reached normal contrast, the compensating effect would be largely canceled, although you might gain a smidge of film speed. Most developers will yield excellent results with normal developing techniques, making the time and trouble of water-bath developing for normal-contrast negatives superfluous.
2. You need to rethink this question: your premise is that water-bath development can somehow deal with lots of different-contrast shots on one roll. Things just don't work like that. I have posted here and elsewhere on my approach to exposure and development for dealing with roll film. Do a search on my name, and you will turn up a detailed description. Here, FWIW, is the short version:
1: Find a "normal" developing time that leaves you lots of room to adjust contrast with paper grades. For 120 film, I recommend standardizing on grade 2 1/2.
2: If you are using an averaging, in-camera, TTL meter, do tests on a normal-contrast subject to establish "N" development, making sure you have adequate shadow detail. Then just bang away. You need only make one exposure compensation: in the case of contrasty subjects, you need to
overexpose one to two stops (depending on how contrasty the subject is). This will ensure adequate shadow detail. Contrast is dealt with when printing.
2A: Metering option #2: You can place the shadows using a spot meter. In this case, the exposure compensation is really unnecessary, but you can improve shadow detail in low-contrast situations by
overexposing one stop (i.e., placing the shadows one Zone higher than normal). This moves the shadows up a bit off the film's toe, giving better shadow separation. Again, contrast is taken care of in printing.
Let me be clear: Unless you have an entire roll pictures that needs expanding/contracting, there is no advantage to using anything but a well-chosen normal development for roll film. Using a contraction scheme, like water-bath, will just underdevelop all the normal and low-contrast shots and cost you film speed in the process
Best, and hope this helps.
Doremus Scudder
www.DoremusScudder.com