Wikiquote and many other sites list this quote:
Make the most of the Indian hemp seed, and sow it everywhere!
I couldn't find that volume or page on the Internet.
Yes he did. Though he didn't say it quite like that; according to The writings of George Washington from the original manuscript sources, he wrote in Philadelphia on February 24, 1794 to William Pearce:
I am very glad to hear that the Gardener has saved so much of the St. foin seed, and that of the India Hemp. Make the most you can of both, by sowing them again in drills. [...] The Hemp may be sown any where.
Also, according to Wikipedia, THC-free hemp is relatively new:
To satisfy the UN Narcotics Convention, some Cannabis strains have been bred to produce minimal levels of THC, the principal psychoactive constituent responsible for the "high" associated with marijuana.
The Straight Dope could not find anything about him smoking it, though it was touted as superior crop to tobacco yet of quality too low to export. The superior European hemp fiber quality is interesting in light of this:
The Cannabis genus was first classified using the "modern" system of taxonomic nomenclature by Carolus Linnaeus in 1753, who devised the system still in use for the naming of species.[35] He considered the genus to be monotypic, having just a single species that he named Cannabis sativa L. (L. stands for Linnaeus, and indicates the authority who first named the species). Linnaeus was familiar with European hemp, which was widely cultivated at the time. In 1785, noted evolutionary biologist Jean-Baptiste de Lamarck published a description of a second species of Cannabis, which he named Cannabis indica Lam.[36] Lamarck based his description of the newly named species on plant specimens collected in India. He described C. indica as having poorer fiber quality than C. sativa, but greater utility as an inebriant.
Then again, according to this page, "Indian hemp" could also mean jute (Corchorus capsularis or C. clitorus) or dogbane (Apocynum cannabinum).
