Sorry for the delay in replying, busy life lately
First of all, thanks for the tips about how to create water, we'll be sure to test those methods out. It's a lot of water, so we'll probably have to think up some not so expensive method, somehow.
For the towers, we use a 3 millimeter thin foam board (without a cardboard surface), to bend it more easily, and we glue it carefully with a special (expensive) glue that works well with the foamboard. It's a contact glue that needs to be applied on both the foam board and the round cardboard roll, and allowed to harden for a period of time (I don't remember exactly, but I think it was about an hour), then we carefully roll the foam board onto the round tower and let it dry up for (I think it was) 24 hours or more. I don't rember the brand of the glue, but I can check, if someone is interested. I know it cost us about 120 SEK (about 17 US dollars) per bottle, and we used quite a few bottles (maybe 4-5 for the towers). The reason I'm a bit hazy about remembering the details is because we've been building for quite a while, and the glueing took place a while back.
Glueing the flat surfaces for the walls is much more easy to do, and we use ordinary glue for woodwork (water-based, white when wet, invisible when dried) for that. I imagine almost any sort of cheep(ish) glue would work, since it's flat and fairly big surfaces glued together. For the walls we use thicker foam board, about 5 millimeters, glued onto an inner "skeleton" of foam board with cardboard surfaces, to give the structure strength. I'm sure we could work with cheaper materials, but we like to make it damage resistant, to hold up for transporting between game-cons.
To draw the stonework we use an ordinary sharpened pencil to draw the stones into the foam board (again without a cardboard surface). It's easy to do and it looks really great. At first we tried to carve the stones with a pointy object, like a nail or something, but it turned out that a sharpened pencil is much easier to work with, since it will only "dent" the surface, not tear into it (which slows down the work and offers more resistance).
It's still a slow process which takes a lot of time, but the result is well worth the effort.
The castle is being built to use at games conventions, Iviniacon will probably be the first (if we manage to get it done on time). We try not to speed-build the thing, since we build it because we like building, not necessarily to use it for gaming (though we will, eventually). We both got steady jobs, so it's hard to find the time for it, unfortunately, and it is very time-consuming. But fun!
If anyone has more questions, fire away!