There was a wonderful book I read several years ago. Dancing on the Edge. I believe the author's last name was Han or something like that. This is about a girl who chases herself in an effort to prove she has meaning and value. Really neat references to Plato's The Cave in it as well. Good luck, and by the way I like the making of a connection between the music and the books.
When thinking of connections between "Waterfalls" and piece of literature, I always leap to The Great Gatsby and Death of a Salesman. Neither, of course, are short stories but both relate to the idea of the dangerous repercussions of dreams that are too idealistic. For a more concrete connection, you might also consider the YA novel Smack; although the British dialogue and slang might be difficult for some students to grasp at first, it's a "page turner" that students can easily get into.
I would suggest that examining the life of Lisa Lopes might help in providing a background for the song. She writes it while in rehab for drug use and there is much there to indicate that the addictive personality that would "chase waterfalls" would also be engaged in dangerous behavior. I might also check out the video of the song that plays with these ideas in different contexts. From the background of "Left Eye" and the video that follows, some story ideas should be evident. Essentially, the song is about the idea of chasing some illusory notion of the good that can end up causing more harm than anything else and endanger the lives of the individual who dreams as well as the individuals who have to stand by and bear witness.
Thank you very much akannan and copeimat. I believe this semester Lisa Lopes is perfect but next semester I will definitely look into the novel Smack. Although one can never go wrong with the Great Gatsby. Cheers!