I believe Doxygen is the most common platform for generating documentation, and as far as I know, it's more or less able to cover JavaDoc-notation (not limited to of course). I've used doxygen for C, with OK results, I do think it's more suitable for C++ though. You might want to look into robodoc as well, although I think Occam's Razor will tell you to rather go for Doxygen.
Regarding how much documentation, I've never been a documentation-fan myself, but whether I like it or not, having more documentation always beats having no documentation. I'd put the API-documentation in the header file, and the implementation documentation in the implementation (stands to reason, doesn't it?). :) That way, IDEs have the chance to pick it up and show it during autocompletion (Eclipse does this for JavaDocs, for example, perhaps also for doxygen?), which shouldn't be underestimated. JavaDoc has this additional quirk that it uses the first sentence (i.e. up to the first full stop) as a brief description, don't know if Doxygen does this though, but if so, it should be taken into consideration when writing the documentation.
Having a lot of documentation runs the risk of being out of date, however, keeping the documentation close to the code will give people a chance to keep it up to date, so you should definately keep it in the source/header files. What shouldn't be forgotten though is the production of documentation. Yes, some people will use the documentation directly (through the IDE or whatever, or just reading the header file), but some people prefer other ways, so you should probably consider putting your (regularly updated) API documentation online, all nice and browsable, as well as perhaps producing man-files if you're targeting *nix-based developers.
That's my two cents.