They had fab vegitarian food at Lily Beach when I was there at Christmas. I'm not a veggie but i had a vegitarian curry and rice every day for lunch. i would never have dreamed they would be so good. My favourite was a green bean and potato, but the cauliflower, carrott and bean was good too.
I could be wrong but i though the water bungalows on the Island were detatched. I however would not call them 'true' water bungalows as they are actually built on the edge of the beach and only the sun deck is over water.
The standard rooms were lovely - I though the locaation of the water bungalows was not great - they are fairly near the incinerator. I'm not sure they are worth the extra cost.
We loved Lily Beach - it is vary casual (i hardly wore shoes the whole tome i was there as even the restaurant and main bar have a sand flooe so heeled shoes are a waste of time. We loved it so much we have book to go back next December.