You can camp at most of the canal lock areas, and there are a bunch of "official" cost-free camping areas with bathrooms, showers, etc. in towns all up and down the canal; Holley, Newark, Middleport, Brockport, etc -- they generally cater to overnight boaters, but bikers are welcome too.

And particularly in the western end there's no lack of out-of-the way places very close by where you can put up a tent. Lots of people just notify the local police and camp out in town parks.

In the Adirondacks you can camp on state land anywhere, with just a few restrictions; you have to be at least 150 feet from water, unless you're at a marked tenting site, etc. Regulations can be found online.

You might want to check out the CrazyGuyOnABike website to read trip reports--just search for "Erie Canal" and "Adirondacks."

In regards to a route, you could try something like flying into Buffalo, taking the canal up to Rome, heading into the Adirondacks, and then go south back down towards Albany where you can head back home.

Edit: Also, in terms of routing, winds are generally westerly in upstate NY, so given a choice, heading from Buffalo to Albany is preferred.