Some people use indented kraft paper, yes.. for a long time I used sheets of unprinted newspaper (very similar) from here: http://www.foodservicedirect.com/ind...per_Sheets.htm

I've since switched to aspen since I find it easier to keep the cages clean.. just pick out the dirty spots, and completely clean the cage every month or so.

To keep the humidity up, you can implement a large water dish, put in a humid hide, or mist the cage down regularly. Some people use room humidifiers with success as well.