I never got sick from the water, but I might have only been drinking bottled water (in Chiang Mai, Chiang Rai, Bangkok, Phuket, the islands). If you want to be extra careful, don't drink anything with ice (that includes the fruit drinks).
Thailand is quite safe. Chiang Mai is definitely safer than Bangkok. Bangkok feels a bit like a crazy big city. Chiang Mai is friendly and more relaxed (and the weather is cooler, which is nice in the hot season). It is also cheaper. Thailand really values customer service. Tipping is more common in resorts and places with a large international clientele. 10% at a restaurant is fine (I think locals might even tip less.) Tipping is not required (but in upscale restaurants they may include a 10% tip). Round up in taxis. I've found especially in Bangkok (especially to/from the airport), taxi drivers will insist on a tip ... it is really up to you.
Most people in Thailand are polite and courteous.
I think you will enjoy it! Have fun!