It sounds like what I'd call a spring rather than an artesian well. There are bunches of springs around here and some are used for drinking water, but I don't think a health departments would 'certify' one and I'd certainly never advise anybody to use one for drinking. Using spring-water or dug well water for that matter, for drinking is a little tricky. There's always the possibility of a spill or flood somewhere that contaminates the surface water table. However, we do use a spring near our camp sometimes. A well half-tile was sunk so the collected water is deep enough to dip without stirring up sand.

The trick to using spring water is that the spring should have a good flow rate so water doesn't sit in a collection basin for long and the basin should be very close to the source of the spring. The water shouldn't be stored for long either. Basically, you don't have to worry much about sand filtering if the water is collected near the source, because it probably was already running for miles through sand. However, running water through any appreciable length of pipe invites bacterial contamination.

What you want to do seems basically feasible but with a few problems. In fact the previous owner of our house ran 2" drain pipe from a spring to a well tile near his boat and used it to keep minnows. The trick is that water won't run across a horizontal pipe unless it has a 'head' above the pipe. A 4% grade is good for drainage--less might work for a water feed. However, you do need maybe 8' of drop in 200' to get the water to the side of your hill. It doesn't make any difference if the drop is entirely at the front end of a pipe or if the pipe is run on a grade angle. The drop has to be there. The guy with the minnow trap made rock piles of descending height to get the water to the well tile.

If the spring has good flow, a holding tank wouldn't be needed. Just pipe out of a collection basin, across the flat and down the hill. However, 200' plus 8' for to get across the flat is going to provide 80 - 90 lbs. pressure at the building, which might be more than is desirable. However, unless fairly large diameter pipe is used, there may not be a lot of pressure or flow when a tap is open. An open ended standpipe installed in the pipe part way down the hill would reduce the pressure but also would provide a new stream down the hill.

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