I can't help you with the 3-and-under questions, but I can give you some details about the Blue Lagoon Dolphin Encounter that we did last month.
We enjoyed the dolphins, but we had not expected the long boat ride ahead of time. We enjoyed it but probably wouldn't do it again.
First, according to the instructions on our tickets and in the Navigator, we all met in a bar onboard. A Disney person had us sign the waivers . . . then she gave us tickets for lunch, tickets that showed we'd paid for the dolphin excursion, towels, and stickers that showed we were part of the dolphin group.
The people who were going on the Blue Lagoon Beach Day met in the same place, but the received different stickers. Note: do not pay for BOTH the dolphin excursion and the beach day -- some people did this. They're right there on the same island, which is very small. If you do the early dolphin excursion, you can spend the rest of the day sunning on the beach for free. The boat left (I think) at 2:00 and 4:00 -- you decide when to return.
We left the ship in a HUGE group -- we didn't like that part -- and walked, I guess, half a mile through some shops, etc. to a two-decker boat. My family was the last to board, and we didn't get a seat on the boat. It was rather like the chairs at the Mickey pool; some people would rather have two chairs for themselves and their stuff rather than let other people have one. The ride was about 45 minutes.
When we reached the island, the Blue Lagoon Beach people were instructed to go one direction while the dolphin people went the other. It is something of a walk to the dolphin area -- perfectly do-able for school-aged children and adults, but I don't think I'd take pre-schoolers. We could see the dolphins as we walked, so we were very excited!
Once we were there, we heard a short talk on what we'd do in the dolphin area. Our photography options were explained to us at the end of the talk -- after all, they're trying to make money.
We were then divided into two groups, and we went down to the water! Each group was taken to a floating O-shaped dock (covered, no fear of sunburn), and we sat on three sides of it. We were given lockers big enough to hold fanny packs and maybe shoes. We were asked to remove jewlery, but cameras were allowed in the dolphin area (with the warning that they would get wet).
The dolphin trainer introduced us to McGuiver, who'd starred in the '95 version of Flipper. Each individual family got into the water briefly (there's a nice wide metal grate about 3' in the water that you step down onto, and a picture was taken as the dolphin kissed one person. The picture is $15, if you wish to purchase it.
The trainer then began the program in earnest. He took 1/3 of the group into the water, and each person got a chance to interact with the dolphin: the dolphin kissed us, danced with us, etc. Two small children (including my usually 1st grader) were frightened by the size of the dolphin and they got out of the water. Just as the advertising said, we were in the water with the dolphin for about 20 minutes.
When it was over, we exited (through the gift shop) and went to eat lunch at the only restaurant on the island. Disney had provided us with tickets for lunch, which was suprising because it wasn't mentioned in the brochure. It might have been a mistake. Lunch was good: burgers, hot dogs, chicken, fish . . . we enjoyed it.
We had some time left before the 2:00 boat back to the ship, so we spent a little bit of time on the beach, which was beautiful! DH wanted to go to Atlantis, so we chose to take the early boat back; because the crowd was split in half (many choosing to stay on the beach), seats were plentiful. I think I would have enjoyed the Blue Lagoon Beach Day very much -- it's almost as nice as
Castaway Cay.
When we returned to Nassau, we were beseiged by the hair-braiders -- that wasn't pleasant. We walked through the shops, but didn't really see anything interesting.
Again, we enjoyed the dolphin excursion. It was expensive but worthwhile -- except for my scaredy-cat child. I was disappointed that we spent so much time on the transfer-boat; that really wasn't made clear, and I didn't know to ask. I might do this again when the girls are teenagers -- they'd see it differently then. It's not an every-year type thing.
Questions? Please ask.
Getting more time with dolphins by buying the album can be done even if you take the Disney excursion? or do you have to go wtih the other company for great pictures and extra time. Please let me know, any info. would help. 
