Hello Mark
I cannot see any fungal signs on the close up you provide. You may want to bring a sample to the Extension office for examination under the microscope if you are concerned about that. Unfortunately our help desk is closed for the season so you will have to wait until spring. 
Looking at the image is suspect the problem is an abiotic problem. Can you tell me a bit more about these trees?
How long ago were they planted?
Is there landscape cloth under your rock-scape?
What is your soil like, sandy, clay, loam?
When you say 18 gallons of water a week is that each of the trees or all of them combined?
Is there any reason to think the trees may be planted too deep? Ideally you should be able to see root flair above the soil line. This can be more difficult to see on spruces that it is on deciduous trees but perhaps it will be visible.
If you can answer any of these questions it may be easier to narrow down what is going with these trees.