I agree that Grand Cayman would be a good choice. There is snorkeling, diving, parasailing, kayaking available. the entire island is safe so you wouldn't have to be stuck at a hotel. Check VRBO for rentals on Seven Mile Beach.

Try Vieques, Puerto Rico. Off the beaten path - for now but it's being discovered and it won't be this non-commerical for long. Even at the height of the season you can still have a large swatch of beautiful white sand to yourselves. Lots of options of things to do that have to do with the water. It's a slower pace - no chains types of anything but lots of great local food/restaurant options. You can rent a villa - no problem - there are lots of options. However, we always tell people - rent your car first then select your lodging.

Thanks VSJComments, we are considering Vieques. Can we still go to Puerto Rico by car to tour the town for the day ? Is there good snorkeling options here?

Why do you say rent the car before lodging ?

Kush

I have to agree with Grand Cayman as a really nice destination for families, snorkeling, great water, and beaches. We easily got around the island and found it very safe. There are many condos to rent.

Puerto Rico, and I have family there, is not my favorite place, but will offer many different options on sightseeing, snorkeling and great hotels/dinners available.