I have a 1202 also and it has the water tub you are discussing. I put the pads in for the hatch but not for the first 18 days. It really depends on where you want your humidity to be. Remember the humidity has nothing to do with the water level in the tub. it is only affected by the amount of water surface exposed to the air. I cant tell you anything about the cardboard hatcher tray, mine is a metal tray with hardware clother bottom.
The 1202 takes a lot of water. I ran seven gallons of water though mine on this last hatch. I live in a very dry climate, so it takes a lot of water to reach the humidity levels required.