Techromancer: I think I'm usually around level 5 or so when it comes time to deal with the watershed; I'll either try to sneak past Harry and fall back on talking my way out if he spots me or else just shoot my way through with a hunting/sniper rifle (starting with the outside guy).
For a close-in fighter, try sneaking (this can prevent some/all of the other super mutants from noticing the fight) and go for called shots - the eyes are the best target but if you can cripple his arm that laser rifle won't do him any good. One trick I've used on Deathclaws with an unarmed fighter is to sneak in, shoot at one from a good distance to get its attention (hopefully you hit, but mostly you want to draw it in and get it farther from the others) and then pummel it to death.
You may want to tackle the guy outside first so you can run for it if need be without having an enemy behind you.
Well Im now way past the watershed. I got the chip and am currently lvl 8. I need to get to lvl 9 so I can get bonus hand to hand attacks for an extra attack.
I am not really sure what to do to level up. Should I just join a caravan or something and gain exp there. I tried going to the cathedral but those guys are way too tough.