The best rates are on the street, though there are some traps to be wary of. Some money changers charge a commission though you can easily avoid these if you hunt around while shopping. Lately, a big trap has been rigged or faulty calculators in the Tuban and Kuta areas. Its best to check rates on your calculator or with a good old fashioned piece of paper and pen. Do not drink water from the taps.
Water is cheap and easily available in sealed bottles.
When buying water check the seal on your bottle is intact. Ice is OK to drink in larger restaurants, bars and hotels as its safety is government regulated. The key to enjoying the many excellent restaurants in Bali is to go to where there is higher turnover. Do not eat off the roadside carts. They are cheap and tempting, but not a good idea for most tourists.