| hi kim-
great questions. achieving legato-sounding phrases using the tapping technique can be very challenging, simply because of the more aggressive-yet-less-delicate nature of the technique, itself. regardless of how you might approach tapping, the initial taps that sound the starting notes of any phrase will require at least a little bit of 'muscle-ing' to get the notes to ring. subsequent hammer-ons played on the same string will of course sound smoother, so the challenge is to try and get the attacks of the notes within the phrase to stay as dynamically smooth as possible. another challenge we're faced with is the overall control of dynamics, given the fact that it is going to be harder to play softly when striking a note in order to sound it.
what i do is try and get my 2 hands to work together to try and maintain as much control as possible. for example, instead of maybe just relying on a non-tapping hand to take care of muting tasks, i'll try and use contact from my tapping hand to mute if my hand is in a position to do so. although it may not be inherently obvious, the better job you do of controlling your muting, the easier it will be to control your dynamics. this is because you won't have to utilize as much hand motion/contact to keep the strings quiet, and this will free your hands up more to be more judicious with your attacks. hope that makes sense...
regarding allowing strings to come all the way up from the fingerboard, i think some fine attention to details can help you with that, as well. if you think about it, maintaining contact with the strings, even after playing them, will take care of muting of that string as long as you touch it. if that's the case, then regardless of if you let it all the way up or only partially up you will maintain the same degree of control as long as your finger (or other part of her hand) maintains contact. related to that, keep in mind that you can use any part of your hands to help with the muting. i routinely shift my hand positions while tapping to try and maximize contact as much as possible.
if you're having trouble getting power on the highest string only, it might be worth taking a look at the setup of your bass. a good setup can help you tremendously if you are trying to tap. if you play with really high action, it is going to take proportionately more effort to sound the notes, and the increased distance between the underside of the strings and your frets add a small but significant amount of motion that will be required to sound the notes, and this increases your workload, etc, etc... of course, you don't want your action to be too low, either, but at the very least you want to make sure that the arc your strings follow across the bridge is smooth and consistent across the board. if you are not skilled at setups, it would be worth getting someone who is to look at your bass. in the simplest explanation, you just might need to work on your hand/tapping strength, with individual fingers. not all of our fingers will tap with the same power by default. it takes a little bit of patience, but working on equalizing your finger strength is worth the effort.
hope that helps,
adam | 
