I have never been there (going in May) but have heard that Bluewater Key is the nicest near Key West. But it is very pricey, ~$100 / night. But you are right on the water and I am "splurging".
Tell your friends to try the Florida State Parks (I was not allowed to send the url with this message
Camping fees are around 31.00 (including taxes).
Bahia Honda SP is about 45 minutes from Key West and is beautiful.
Long Key (sites are waterfront), John Pennekamp (Key Largo, great for serious divers), and a new addition Curry Hammock.