Hi, Bridget,
I can help with a few of these things. I think the bus will require a transfer in Bilbao. There are frequent buses from Santander to Bilbao, on Alsa. Looks like it's 1 1/2 - 2 hours depending on the bus. They leave at 12:30, 1, 2, 3, 3:30, 4, 5, 6 pm. (you can get this information on Movelia.es or alsa.es websites).
From Bilbao to Gernika, it looks like it's a different bus company, BizkaiBus. Their website shows buses to Gernika from Bilbao on a half hour basis, Monday to Friday at least. It's only about 35 km so it won't be a long trip.
What I can't tell you is if the arrival in Bilbao on Alsa will be the same place as the departure stop for Gernika, but I think these things are usually pretty well organized in Spain.
When I walked in May 2007, we used the CSJ guide. There were times we were very greatful to be walking with Germans who had their incredibly up to date and very detailed guide. I'm sorry I can't tell you the title, though. In May, I had a lightweight sleeping bag and was occasionally cold, but I am what the Spaniards call "friolera" -- sounds like Peter may be also.
Hope this helps a bit. Lucky you, the Norte is drop dead gorgeous! Laurie