Sounds like you did a decent job with the clay treatment - it should come up looking rather nasty! As for those water spots, while I don't recommend the fingernail removal process, at least it proves that you have bonded contaminants and not badly etched paint. That is very good news. I have to say though, if you really needed to use both clay bars then your car was a real mess and the previous owner should be hunted down and shot. Only once have I ever had to use more than a single piece of clay on a car. Anyway, I would clay the water spotted areas again to see if you can eliminate the remaining spots. Meguiar's does sell a more aggressive clay than what can be had over the counter. Check their website for availablity.

You can wash the wax applicator and reuse it, not a problem.

Congrats on your first clay bar application. Feels good bringing the glow back to the finish, doesn't it?