Hi Jayholdman. Both excellent questions. I have never had any problems with drinking water in Spain, and I don't think you will either. You could always buy bottled water but I've never felt the need. I have been going to France, Italy and Spain (mostly France) for at least thirty years now and never had a tummy upset due to water. But if you are really concerned, I'm sure most pharmaceutical stores will sell tablets for treating water.
I would say, don't take any water from running streams. My husband did that once, and had a tummy upset the following day - which was almost certainly down to the water from the stream. I had some tablets for that and it soon cleared up. Having said that, if there is a sign saying "pottable water", I believe that is safe to drink.
Your second question. Although most of the albergues are treated for bed bugs, the reason you are advised to keep your backpack off the floor is to that no nasty creepy crawlies might make their way into it. If you have to, placing it in a plastic bag would be an excellent solution. The last thing you want is to be plaqued by bed bugs. We rode the
Camino de Santiago in 2013 and never came across any. Perhaps we were just lucky, or perhaps it was because the albergues seemed to be taking care and making sure there wasn't an infestation.
Most of all, go, have a phenomenal time, and you will never regret the decision to do it. Buen Camino.