My husband and some friends rented a house for the week on Magnetic Island (in Picnic Bay) during July of 2007. Weather was perfect (average 20 to 27 deg each day with low humidity). The whole island was beautiful and the locals pleasant.
They have a well organised bus service that negates the need for a hire car unless you were really desperate.
The sunset at Horseshoe Bay is something to experience.
The estate management company that we rented the house from could not have been more friendly and the house was spectacular and perfectly situated. It had a swimming pool however it was too cold to swim in - go the beaches instead.
One of the loveliest beaches is at Alma Bay in Arcadia - very popular with families too as it is very sheltered. The pub/club across the road from the beach is also very good and I believe also has accommodation.
The ferry service from Townsville is very frequent and there is an airport shuttle service to the ferry marina and the Magnetic Island Bus Service meets every ferry from the mainland.
We booked again for next year before we had even left - very happy customers and we are already looking forward to returning there next year.