Susan:
The most inaccurate method of all is walking with your nose in your compass. And there is no need to worry about how to carry a floating needle in a cup... (besides, if you rely on surface tension to keep the needle afloat the cup will have to stay still. Any splashing will drown the needle...)

The best way to use a compass is to seek out distant landmarks in the direction you want to travel. Reaching that landmark you check your compass again and aim for a new distant target. Works well in terrain where you have distinct features far away. If you can't see really far this method is a) tedious, b) not so accurate.

If all I have is a floating-needle-in-a-cup, I would check my direction with the compass, find a target in the appropriate direction, put the pin somewhere safe and drink the water. Then I walk to my target, fill up my improvised compass and repeat. There is no need to re-check the compass before I reach my distant target.