We stayed in Vila Margita for three nights in August, and I have to say that the staff were very friendly, the room comfortable and the food fine. The problem is that the price is nearly EUR150 per night (you can stay in a private apartment for half that).
The building is beautiful, art deco style with antique (style) furniture. This is unusual for Croatia (where most apartments are very functionally furnished). The bed was large and comfortable, and our room had splendid views over Rab Town and the harbour. The room was air conditioned (although not a very modern system which didn't work very well) and has TV/satellite. English speakers fare poorly here though; there's only about two English channels on offer. Germans and Italians will do fine.
The hotel is next to the Hotel Imperial, a large square structure which isn't really in keeping with the area. There is loud entertainment on an outside terrace, very audible from the Margita, but this did stop by...
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