If all are getting along, you can leave the other female in the same cage. If you suspect that new mom is stressed by a cagemate (agressive toward the other if she comes near the babies) then separate.
If all are together, I would keep everything timothy-based. Mom and babies are often given alfalfa because they use more calcium, but they can get enough calcium from a healthy diet without needing alfalfa. You could give them a bit of extra spinach here and there or some parsley, and that will be fine, just be careful that the other female is not getting lots of thes extra-calcium veggies. I find the parsley is a nice thing to give when you are holding them, so you know who has eaten it.
The babies will nurse from their mom until they are separated, and she will often decrease how much she let's them nurse as they get older. I find that female babies that are kept with their mom will nurse for a few weeks longer. Yes, they will also be drinking water. They watch everything that mom does, and will try it out. The more adventurous will try right away, and the more cautious ones may wait and watch a bit before trying. Soon you will see that anything mom is eating, babies are right there trying to take it out of mom's mouth to try it.