Diacetyl rest is needed only if the beer tastes like diacetyl. If not, you can skip it. If you do need one, it is much better to do it in primary with all the yeast still in there, than to remove the yeast. Yeast eats the diacetyl. If you rack the beer, you’re removing like 95% of the yeast! Not a good thing.
Regarding water, and which is better, distilled or spring water or tap water, it depends on the style, and the profiles of the different water sources. Generally speaking, distilled water is best for light yellow colored beers, hard water (such as spring water) is better for brown or black beers, and a blend is best for anything in between. But of course there are a lot of exceptions. Water is a huge topic and one best reserved for experienced brewers. Best advice is not to worry about it until/unless you think it might be causing a problem and all other options have been exhausted. I’ve been playing around with water and learning about it for many years, and I feel like I’m just starting to get the hang of it now. But you can make great beer without worrying too much about it. If in doubt, it’s often/usually best to just use a blend of distilled water and another water source. That’s the best advice for starting out.