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It sounds like you may have Phytophthora Root Rot. It kills the azaleas slowly and lives in the soil so it will kill any azaleas planted in that location if it is not treated. Here is more information:
https://www.gardeningknowhow.com/ornamental/shrubs/azalea/phytophthora-root-rot-azaleas.htm

I'll bet you have an ant nest in your pot. Drench the soil with an insecticide.

Regular tap water should not hurt the plant, though distilled water or rainwater is often preferable. I am hoping the container you have it sitting in is providing enough drainage. Otherwise, you will eventually rot out the roots. The browning of leaves could result from either too much or too little watering. This article has more information: https://www.gardeningknowhow.com/plant-problems/environmental/what-causes-brown-edges-on-leaves-of-plant.htm

Insecticidal soap is usually effective in controlling lace bugs in late spring or fall. The following articles should be of some help to you:
https://www.gardeningknowhow.com/problems/pests/how-to-make-white-oil-for-an-insecticide.htm
https://www.gardeningknowhow.com/ornamental/shrubs/azalea/azalea-lace-bug.htm

Don't give up yet! Keep watering as you normally do. Don't get carried away and do more damage by overwatering though. The brittle leaves will fall off, but may be replaced with new growth. We'll keep our fingers crossed.

Those flies are telling you that your bush has another problem. The flies are attracted to the honeydew of other insects. Treat the bush with neem oil and this should help. Here is more information: https://www.gardeningknowhow.com/plant-problems/pests/pesticides/neem-oil-uses.htm