I honestly don't know about the paper towels. To tell you the truth, I would probably try it with Viva towels. They are the best paper towels I've ever used. Very soft, but really durable. We've accidentally washed them several times, and they don't fall apart. They remind me of reusable towels.
I also don't know about the baby bath. Are you able to use baby bath on her now? I wouldn't think it would be any harsher than that. Perhaps instead of baby bath you could try some of that special soap for people with really sensitive skin. Of course I can't think of the name right now, but Cody has a bottle around her somewhere. I'll dig it out and tell you what it's called. Or maybe use some of that J&J Sensitive Skin bath?