Hi anniemc,
'fraid I have to start with a bit of unpleasant news:- I've read recently on another forum that there is extensive building work in progress at the Aqua Luz apartments next door to Sol Lagos.If you'd like a link to the article just shout.Are you going d.i.y. or are you on a package?If you are in a position to change accomodation and need recommendations just ask.
Yes, the Sol Lagos are just outside town - about 5 minutes from the Bombeiros(fire station)and another 5 down into town;the tourist train passes close to the apartments so that's an alternative if you don't feel like walking.
As for restaurants,you'll know that you're spoilt for choice in Lagos, but among our favourites are O Galeao(up the street past Fools & Horses bar, turn left them immediately right-probably best to book in August), O Navegador(off main street-Rua 25 Abril, turn left after A Veneza restaurant and O Navegador is 50yds. down on the right.)We also like the Swiss restaurant, A Vaca, near to the Police station but there was a rumour last year that this was being sold.( the restaurant, not the Police station !!)
There are several new restaurants on the marina and a new fish restaurant - Estrela do Mar - above the renovated fish market, There are sensational views from here.
Regarding scenery, basically the further West you go from Lagos the more rugged and spectacular the scenery gets; if you're hiring a car you'll be able to find secluded little coves and beaches all along the western coast.
You'll know,having been to Lagos previously, how good the trip to the grottos is - they're just as breathtaking now as they were 14 years ago!
Personally, I've never had any problem with insects but we never go in August - it's too hot for us.
Think I've covered all your questions, but, if you need any more help, just ask.