Kapalai Resort is stunning. The service was great, the food was fabulous, our dive master was awesome (we just so happened to get the infamous George who also is THE man that decides who will be on the Sipadan boats the following day), and they do have a large above the water circular sand area for sun bathing which you can see in guest photos uploaded into tripadvisor. Our room was simple but lovely.
Of everywhere I've stayed in my life, Kapalai is my favorite.
Some Malaysia military guys actually stay at the resort in the staff wing. Each guest room is equipped with a big red emergency button that they politely mention is not for room service.
The dive masters watch you closely on your group check out dive that is done the day of your arrival. We noticed that divers with buoyancy issues and poor dive skills didn't end up on the boat to Sipadan the next day. Don't know if they eventually got to go on later days or not.
Sipadan Island occasionally has ripping currents and an impressive drop off. It is rated as an intermediate to advanced level dive destination.
I first went to Sipadan and stayed on the island without hesitation in 2003, 3 yrs after the Abu Sayyaf kidnappings. I would go to Sipadan four times a year if I could! Abu Sayyef are still crawling all over that area of Borneo and zip back n forth between the Philippines and Borneo. The Malaysia military presence nowadays must be what keeps them away from the tourists. Or maybe it is their desire to not draw military attention to their island enclaves. I don't worry about it because it is wasted worry energy. I have traveled alone in that part of Borneo several times (I lived there for 6 months once upon a time), although my Sabahan SO prefers I travel with him or a local. He likes to point out AS at the markets. I don't know how the locals know them, but they do.
So, yes there are western-people-kidnapping terrorists in east Sabah. But my guess is your chances of having a negative encounter with them is less than your chance of being killed by a falling coconut. The situation isn't like Somalian pirates. Tourism is a huge money maker in Sabah. In 2010 they had >2 million tourists. Malaysia is pretty committed to protecting that source of income.
It is absolutely worth the pain to get there! Between Kapalai resort and Sipadan diving, we felt like we were living in a fantasy! It was quite surreal actually.
I think the best option to get you there is on Cathay Pacific Airline which will get you from JFK to Kota Kinabalu (BKI) without any hideous long layovers. They have a nice return flight itinerary also. It is a nice airline for long haul flights. From BKI you can fly to Tawau (TWU) on either Air Asia or Malaysia Airlines. The dive operator you book with will pick you up at Tawau airport and take you the rest of the way as part of your package.
I agree with "underwater".
If you are traveling half way around the world, I suggest you also do a Kinabatangan River tour to see some of Sabah's wildlife. The river safaris are brilliant!
Orangutans (you would most likely see 6 species of primates on any 3D/2N package), elephants, exotic birds, crocodiles, etc.
Sepilok Orangutan Rehab Center near Sandakan is 'blech' to me.
The best time to dive Sipadan is when Singapore, Taiwan, Korea, Malaysia, and Hong Kong (did I forget anyone?!) are not having a major holiday
They make up a good chunk of the divers to Sipadan.
Also, off-peak for Europeans and Aussies.
Before I book my next visit, I will research the badoinkers out of that to up my odds for getting a permit.
Good luck.
