How do you finish this damn puzzle... anyone?

Mostly by trial and error - just don't make it harder than it needs to be. When you enter the first room, just flip the levers and leave them that way. This will raise enough sections of the walkways for you to be able to jump over to the west section. At the west section levers - flip them all and check to see that you can make it to the east section (by jumping). I believe the only set of levers I ever had to reset were on the west section but very few needed to be reset. It isn't until you finally make it to the north section and the levers there that you will get all the pathways completed. Keep it simple, flip as few as you need - check out the window to see what is going up or down.
And don't forget to find the alcove with the chest that is IN the water area too!

Wyv