As a fellow SoCal diver who has interacted with you previously regarding Tahiti diving (Paul Gauguin), I'll throw in my two cents. We're leaving in a couple weeks for our fifth trip to Cozumel and will be staying at Cozumel Palace for the second time, diving with Living Underwater for our first time. You've heard enough about LU, so I'll comment on the Palace instead. Before staying there, I thought I was the sort of person who hated AIs. We stayed at the Presidente once but felt it was too expensive for what we received when compared to other hotel prices on the island, plus it's an expensive taxi to get to town and back. We stayed in town at the Bahia Suites once, but prefer hotels with more amenities. I also stayed at the former Fiesta Inn once, an AI with watered drinks and food only edible at breakfast and lunch so we ended up dining out every night. Then we discovered the Palace.
I'd suggest you take a look at the reviews the Palace garners on TripAdvisor. It's rare that an AI gets such practically unanimous raves. The location is perfect, just south of town to avoid the noise and cruise ship crowds, but an easy walk. They have a dock on the premises so it's easy to get picked up there by any dive op you choose. The rooms are over the top, with a huge jacuzzi, hammock on the balcony, and 24-hour included room service. The service is incredible, the nightly entertainment was fun, they use decent booze in the drinks, and food, probably the most important consideration for me, is actually rather good. It's hard to beat a big (free) room service breakfast for the early morning dive days and there's a choice of 4 venues for dinner, each with expansive menus, so you'd have to stay there for a while before getting tired of it. Yes, there are some very good restaurants on the island where you can have great meals, but there are also plenty of mediocre places where you'll be disappointed. Overall, as a dedicated foodie, I've been disappointed by Cozumel retaurants with only a few notable exceptions. When we stayed at the Palace on our last trip, however, my overall dining impression of Cozumel actually went up a notch. Yes, many all-inclusives, including some on the island, are like a mass-market "party line" cruise ship. The Palace, however, is more like a Regent ship. It's an upscale, though not at all stuffy, experience and they pull it off very consistently. The way I like to wine and dine when I'm on vacation can cause restaurant bills to skyrocket - we've found that the Palace helps keep my budget intact without sacrificing quality, not to mention that it's damn convenient to have everything in one place. As a first-timer, you'll definitely want to get out and explore the island a bit, but after we've been there, done that a few times, we're happy to hole up in our little Palace and only emerge to go diving and to fly home. (The one thing we haven't done is drive to Coconuts on the other side of the island, but now I'm freaked out about renting a car there based on a recently published experience.)
I do want to clarify your perception of the $1,500 credit. The "fine print" terms and conditions restricts use of the credit to only $300 worth of spa services, and the spa services are about as pricey as fancy hotel spas anywhere so that $300 is worth about 2 50-minute massages. We booked the "concierge level" at the Palace which throws in 2 additional 25-minute massages, so J will be happy having 4 pummelings during our 6-night stay while I enjoy the bar. Since we're not using the credits for diving (you can apply them for one 2-tank dive with Aqua World - no thanks!) nor are we interested in any of the tours or the dolphin experience, it's actually going to be difficult for us to "spend" the remaining $1,200 in credits. One way is to book the "romantic dinner for 2" that includes lobster and prime beef and Moet and is normally priced at $350 for two - we might do this dinner twice, since the only other means of "spending" our credits is on photos (I'm not very photogenic) or on upgrading to "premium" wines instead of drinking the included, still decent, selection. Yes, the idea of credits is a gimmick, but J is going to be happy with her massages that I might have otherwise balked at affording since she can get them so much cheaper at home, and we'll enjoy our one or two "romantic" dinners to complement the other restaurants on the property and enjoy some nicer bottles of wine to boot. I can promise you that we won't let any of the credits go unspent!
If you have any other questions about the Palace, feel free to fire away.
(Sorry to sound like a Palace cheerleader, Don, but it really is that good)
P.S. I've usually experienced calm seas even when the currents can be roaring below the surface. Boat rides are comfortable in the small boats, nothing like the pounding you get in Hawaii after the trades start blowing, or like trying to make it through the cut in the reef on Ambergris Caye when they practically surf the waves back in (but get brutalized on the way out). The boat rides are smooth, but when it's not hot and sunny, the fast boats can be quite windy and it's easy to get chilled. The premium dive ops pamper you here as well, by providing towels and even windbreakers!