A lot of people have had success with placing a damp towel over the screen top, so yes, that method will work. Since you say "air holes", I'm not sure if you have a screen top or not. If not, and it only has a few air holes, this method will be much less effective. However, if you only have a few air holes, you shouldn't be having much problems with humidity anyway. Describing your setup in more detail would be helpful.

You should be aware that a damp towel might become a breeding ground for mold, bacteria, or other nasties, so you will want to change it out and wash it often. Another alternative is to close up most of the top with something like aluminum foil. This obviously does not add humidity like the damp towel does, but it will trap the existing humidity in the enclosure, making it much easier to keep it stable.

As far as misting inside the enclosure, you are correct that a wet substrate can cause problems. However, you shouldn't need to mist so much that you are making the substrate wet. Just a light misting will raise the humidity a lot, but if your enclosure does not trap in the humidity, you will have to mist often.