How do you refill empty bottles with water? I understood you needed to be standing in a stream but I can find no option for refilling the bottles.

According to readme - try equipping the bottle (it says "click" but that should equip/drink)

I use the http://skyrim.nexusmods.com/mods/24282 mod to refill bottles. I find it to be really convenient. Activate the fountain and, bingo, you're on your way with freshly-refilled bottles. You can also drink from the fountains as well. These two mods go wonderfully well together, in my opinion.