I second hetismij. I lived in Amsterdam for this past year (just returned to the States in August) and every expat I knew there told stories of having conversations just like she talks about - sometimes quite extended in length - where the American/Brit was speaking Dutch and the Dutch person replied in English the whole time. One American woman I knew there, who has lived there for over 20 years and is married to a Dutch guy, used to say she wanted to grab the Dutch person by the shirt-front in such situations and shake them, saying, "LISTEN TO ME. Don't you hear what I'm saying? I'm speaking DUTCH." It was pretty funny.
Anyway, Amsterdam was the one place I've been that when I apologized (in Dutch) for only speaking English and asked if the person spoke English, they sometimes almost seemed offended (in a very polite way). I quickly learned that, at least in the big city, they are proud of their English and asking them whether they speak it seemed to be received by some of them the same way it would have been if I asked them if they knew how to read! So I quit apologizing and quit asking and just spoke English when I had to and was always received with even more politeness, good humor, and no attitude.
There does seem to be some sort of socioeconomic distinction though, for lack of a better word, in English proficiency. People in the tourist areas and "professional" people I encountered (doctors, corporate types, university grads, etc.) spoke truly excellent English and could switch back and forth between Dutch and English seamlessly. I was constantly impressed. People like Fed Ex truck drivers, bicycle mechanics, etc. tended to not speak it as well and sometimes didn't speak that much at all.
In Amsterdam, I hardly ever encountered a single person on the metro or grocery store or Post Office or similar places (where I accosted random strangers and asked various questions all the time) who didn't understand me when I just baldly started the conversation in English.
re: tap water: I always just asked for a carafe of water. I always made sure to order at least one drink of some other kind when I asked for the carafe. Sometimes I had to ask for the water several times (especially in small out of the way places, not in Amsterdam) but I eventually always got it. I will admit I got in the habit of carrying a bottle of water in my purse with me everywhere I went, so I could refill my own water glass if I got tired of begging for it. ;->
Non-Dutch people who have lived there a long time said it used to be harder to get a waiter to give you tap water, but it is changing. One long-time non-Dutch resident told the story of being in a small town cafe some years ago and when he asked for tap water, the waiter said, "It is not possible." This guy had been living in the Netherlands long enough that he had adopted some of their polite but sometimes blunt ways of addressing issues, so he said, "Do you have glasses? Do you have running water? Then it IS possible." Whereupon the waiter admitted defeat and brought him some.
