Peru is pretty safe. Avoid tap water, drink mostly bottled water. Local food is safe although watch out for street vendor food which may be unhygienic. See the Word Travels to Peru for all the details: http://www.wordtravels.com/Travelguide/Countries/Peru
You are right about drinking bottled water but also always eat at recommended places, not because they are clean also because they choose careful the ingredients.
Here are some recommended restarurants
http://www.cuscoperu.com/cusco/hotels-accommodations/043-restaurants-travel-cusco.php
Well, I havent gone to Peru in YEAAAAARRRRSSSS...Will se how it goes, I am not too thrill about water anyways, but thiefts are the ones to watch for...Thanks for you guys commments, Really is nice to have feed back afterwards...and if you are traveling..checkout this page..you will find it helpfull..I'll let you know how it goes guys