Roads are in good condition from all accounts, although it is only open for 10 minutes ever hour on the half hour at swallows grotto, which can be a hassle if you hit it wrong. And be flexible with your time. It can get amazingly frustrating when the valley gets clogged with tour buses.
As for swimming the in Gorge itself, that is not something I would recommend. First, I’m pretty sure someone will report you pretty quick, and second it is very dangerous even when the water level is low. That being said, you can dip your toes in the main river at Wen Shan Hot Springs and if you walk for an hour up the Shakadang river valley there are some very beautiful pools that you can take a dip in without too much hassle. If you really want to swim I would say to go one valley south to San Zahn. That river is large enough for good, deep, accessible swimming holes.
As for waterfalls further south, I don’t really know. There are so many places within an hours drive of Hualien that I rarely explore rivers down that way. There is the Tongmen national forest area that is gorgeous, but has been discovered. You have to line up at 6am to be one of the 300 people a day they let in. I would suggest just driving south and exploring. The people of Hualien are amazingly friendly and if you ask them where there is a nice waterfall I’m sure they will give you some hints.
Sorry I couldn’t be of more help. Have a great trip!