I had the same questions since I started using the Avent last week. I decided to use distilled water because the tap water in Florida is so harsh. When I use to boil with tap water my neb cups would get a powdery white film on them - so I switched to distilled. But I have to say, a part of me is fearful with using distilled water because of the possibility that capacia can be living in it. I just am assuming that the Avent is boiling & killing ALL bugs. (I watched the CFF video about using the Nuk with the Altera and they recommended tap water - but that is not an option with the hard water in my area of the country).
After trying all sorts of ways with the Avent shelves, I decided to use all three. I place one on the bottom with nothing in it (that way the nebs stay out of the water at the bottom of the sterilizer). Then I stack another one on top of that and load up the taller neb pieces upright (not on their sides), with the openings facing down,to get the steam flowing inside the parts. The top basket gets loaded with all the small/short parts.
So far this is the method I am most comfortable with.
I also bravely put the Flutter and Neil Med in the Avent today.... they survived!!