Hi ebanna,
The creek (Mountaineer Creek) is intermittent and there are homes up on Skyline Road above this area so it is not really suitable for drinking water.
I have used water from the lake after boiling it. The issue here is that the lake is subject to blue green algae blooms from time to time. Boiling water with BGA in it actually increases the level
of toxin from the BGA. You can check if BGA is present on the Murray Goulburn Water web site.
http://www.g-mwater.com.au/bluegreenalgae-alert/I'd recomend taking all the water you need. I/we generally carry 3 litres each, have agood drink before leaving the car and leave some back at the car for when we return.
Walking around the lake track from Wallaby Bay would be fine but you would still have to climb the second ridge as there is no track around from Aird Inlet to Mountaineer Creek.
Your distance each way would be around 13km. It might be possible to do the section from Aird Inlet along the lake shore (about 3km) but it is very rocky (loose shale) and quite steep on the North side.
Despite all this stuff I've heaped on you, it is a really nice walk and well worth doing. With the kids in tow I just want you to know what your in for.
What ever you do don't miss out on seeing Stones Outstation. Just no toilet and the same issues with water. It's a beautiful spot and there is evidence that folks have unofficially camped there.