Lake Titicaca was a highlight of our trip (after Machu Pichu of course). We spent a night staying with a family on Island Tequile (spelling?). Sorry – I don’t remember how we organized this, it was a while ago.
We saw people living on floating islands and got to visit. It is a very strange feeling standing on a floating island.
Puno itself wasn’t very nice.
I always learn “hello” and “Thank you” in every country I visit. I find that most people appreciate the effort and will try to communicate with you via charades/pictures after that.
Actually Spanish is the second language in Peru. Many of the locals speak Quechua, their own language from before when the Spanish attacked.
Lonely Planet has a good section on language that you will probably need to book a room, eat some food, etc…