Regarding the water issue; it would be best to replace the subfloor and then put a waterproof membrane over the subfloor before placing the hardwood on top of it. Are you going to do a nail down or glue down? If a nail down, you want a membrane that even while penetrated with a nail, remains waterproof. Try http://www.protectowrap.com/products/flooring.php
Use the wispermat hw. If you are gluing, try Bostiks MVP to seal the concrete and BST or BEST to glue the flooring down.
Regarding the height difference, it would be easiet to take the tile up and level the entire subfloor at one height. This might take a little more prep work but in the end it will be worth it.