Exploring food and drink on KI is lot's of fun. You can read about it in general here. We recommend trying the honey ice cream at Clifford's Honey Farm (and the honey tasting of course), the affogato coffee at KI Spirits (and the gins!), lavender scones at the Lavender Farm and browse the Farmer's markets for local produce (second and fourth Sundays in Kingscote, 1st Sunday in Penneshaw). There is high end dining at Stokes Bay, but if you are tired after a long day and want a great takeaway, then we suggest Bella's (8553 3228) for a pizza or fish and chips at Kangaroo Island Fresh Seafood (8553 0177). If you beat the evening rush, you can ask for locally caught fresh (that day) whiting which is just delicious.
On the other hand, if you want to step out, try the Ozone, and book a table overlooking the bay. The food is good and it's a very pleasant atmosphere. The Queenscliffe Hotel is good for reasonably-priced family dining.
During the day, try Chocolat (Dauncey St) for great coffee, chocolate and light dining. Roger's Cafe has more variety for lunch. The locals eat at the Lighthouse Cafe - it catches the sun for that early morning coffee and is very reasonable. The Rabbit Warren Bakery is where to get your pastie and pie to take down to the beach or foreshore. All of these eateries are on Dauncey St.