If you are trying to build muscle, I would strongly suggest adding protein powder - I drink mine with milk (better taste that with just water). You want to be getting at least 1g of protein for every pound of body weight. Potentially you can do that through regular diet, but it's tough.

For the # of reps and weight to build mass, you might also be interested in the Q&A here:
http://worldfitnessnetwork.com/2009/02/answers-to-your-lean-muscle-questions-2-16-09/
and the science review here:
http://worldfitnessnetwork.com/2009/01/science-news-for-building-lean-muscle-jan-25-2009/ I tend to recommend 6-8 reps using weight that you can just barely get that last rep from. That builds lean muscle and strength. But the key to "lean" muscle is your diet. Eat carbs before/after weight training, but other than that stick with proteins and veggies.

By lean muscle, I'm assuming you're wanting strength over size. In that case, you want lighter weight with higher reps. However, "good" calories are your muscles' best friend so you want to consume as much good calories as you can burn off. This number will increase as you gain muscle mass because the more muscle mass you have, the more calories your body naturally burns off.

As for water, eight full-sized water bottles a day should do the trick. I believe they're roughly 20ish ounces or so but more than that is fine, too. You just don't want to ever feel thirsty or else you're not drinking enough. I've never personally tried any supplements, though…I've always did my routines the ol' corn-fed farmboy way.

"Which one is better for building lean muscle?"
Technically, it is high reps (6-12) for maximum muscle hypertrophy. Low reps (1-5) builds maximum strength. However, I highly suggest training for strength in the beginning. First, you will build mass when you train for strength, just not maximum. Second, bodybuilding (training for mass gain) is much more effective when you are strong, in fact, in the beginning, strength training is more effective.

"Also, what is the best diet for lean muscle?"
Eat healthy, whole foods. Eat 1 gram of protein per pound of body weight you desire to weigh. Drink 3-4 liters of water a day. Your caloric intake is way too low. If you are looking to gain mass:
( goal weight in lbs + (goal weight in lbs x 15%) ) x 25 calories per day
It's going to be a lot and you will gain a little bit of fat. But keep in mind that no bodybuilder you see went from scrawny to buff. They went from scrawny, to fat, to buff. If you try to minimize fat gain, your muscle gains will suffer.

"And finally, is there a supplement that I should be taking with my workout? "
Most are ineffective or overly expensive. If you must, take 1 or 2 scoops of whey protein. You don't need anything else. Whole milk is supplement of choice.

Take a look at the links below if you want some amazing workout plans.