In a similar fashion to what you've seen already, hydrolysis of 2-hydroxypropanenitrile should lead to 2-hydroxypropanoic acid, otherwise known as lactic acid. The OH behaves the same as in a normal alcohol so shouldn't react under those conditions. Yes, with HCl in there you could get some dehydration of the alcohol to CH2=CH-COOH but you won't really get any of this with only dilute HCl as you require harsher conditions for that.
CH3-CH(OH)-CN + 2 H2O + HCl ---> CH3-CH(OH)-COOH + NH4Cl
For the reduction, NaBH4 should be ok. This generally reduces aldehydes and ketones, but not carboxylic acids or esters so you won't need to do anything special.