Restaurants definitely worth visiting on Phillip Island are:

Harry's on the Esplanande - excellent local beef, lamb and seafood overlooking the water.  The best wine list of the restaurants on the island.

The Foreshore Bar and Restaurant at Rhyll (a sleepy fishing village on the island) - sea views and smart food with local wines on the list as well.

Sol Pizza - Just down from the Foreshore Bar and Resataurant, great gourmet pizza and tapas, fully licenced,  right on the water you can watch the black swans and pelicans that live in Rhyll.

April 2007 - New restaurant "Infused" opened in Thompson Ave (Main Street of Cowes).  Also worth the visit.