I have been there a few years ago. Went diving in Cape Mclear and Nkata bay. It was the first (and last) time I dived in sweet water lake, so I didn't know what to expect. I thought it will be a murky bottom but in some places there are lots of huge boulders that are fallen one on top of the other, creating lots of passages, caves, crevices full with fish. There are lots of colorfull fish everywhere, but they are very small ones. The lake is really deep, perhaps having an unexplored bottom at ~1000meters (the lake is in the African rift valley), the whole area is also beautiful and a very nice and peaceful atmosphere. In general it was really nice but after diving in Sinai, S.Africa, Mozambique and Kenya it wan't comparable. I prefer the red sea and I am not sure I would make a trip to Malawi only for diving.
!!! One important note !!!
There are rumors that Bilharzia is prevalent in Lake Malawi. It is important to verify where and when it is safe to dive/bathe in the lake. I wouldn't trust Malawi's health ministry and rather check in the WHO (World Health Organization), or the CIA's information center for travellers (It's no ****, they have something like this). In any case, don't trust travell agents/friends/unqualified people/Untrustful internet sites or whoever tells you "It is OK there" or "Don't worry". Just make sure and enjoy your trip (in case you decide to go there). BTW, I think there's an old (from the late 80s) National Geographic article by David Doubilet on Lake Malawi..