Haven't been there in a while. But I hear it's still really low. May be coming up now with the rain.
As for directions to where the upper and lower meet. Just drive past the turn off for the upper lake. Keep going until you see the road turn up to the left. If you follow the road up to the left you'll find the interlakes parking area. If you follow the gravel road down to the right you'll find the lower lake outlet from the upper lake. There will be a million people fishing there at the outlet this weekend. Do yourself a favor pack yourself a lunch. Then make damn sure you have bear sprey and walk past where the lower lake outflow is and hike along the lake. Just watch out for Mr. Furry Face. They like to come down for a drink now and then.
As for camping there is a campsite on the lower lake just before you get to the turn up to the interlakes parking area. It's on your right before the road that goes down to the outflow from the upper lake. But even with all this rain it will be packed. It always is.
There is other campsites in K country.
Canyon Campground
Elkwood Campground
Boulton Creek Campground
Lower Lake Campground
Mount Sarrail Campground
Interlakes Campground
You might want to call ahead. Here is a website for you to check things out.
http://www.kananaskiscountrycampgrounds.com/peter.html
As for flies try using a clouser minnow. I always like brown/white or black/white. Nothing too big as far as your clouser. Or a black or green wooly bugger.
Good luck hope the rain stops this weekend. Let us know how you make out.
Rob