In my dialogue with Isla when asking her if there is any way to bring magic items through time (to be able to transport the antidote for Stephan and his crew) she doesn't offer any insight. Is there any way for her to answer that question or the player is supposed to figure out what to do without her help?

I think I found a way to do it. But it really requires to improve Isla's disposition towards the player before the whole Dreaming sequence occurs (by some dialogue choices). That's a pretty easy thing to miss, but I guess it makes it more interesting.

If you or one of your party has outlaw skill plant item (reverse of pickpocket) then you can plant items on the Eternals and pickpocket them back when you have returned to the present.

Yes, I managed to get such hint from Isla eventually.

I did not know Isla gives a hint I will try to see if I can get a hint next run through.
What I have not managed to do is the dwarf's quest Lost Love well something like that on my two run throughs. Must have missed something. :)

I assume that quest to find Lily has to be completed in the future. I got some other quests failing like finding stolen fish and such. When I got back to the village (after time travel) for some reason everyone there just dropped dead. That was so confusing. I assume something happened (plague may be?) while the party was away. Or may be that time traveling caused some kind of butterfly effect.

If you want Isla to give that hint, you need to flirt with her and also humor her a bit. Then she becomes more friendly.

I.e. choices in dialogue when you first meet her are important. If you don't choose them right, later she won't tell you about the eternals.

Interesting, I haven't noticed the change in water color, but that makes sense if it somehow got poisoned. I did help the dryad, didn't expect that to have such kind of effect.

In case you don't mind a spoiler...

You can find Lily in Moonstone Clearing, so talk to her after you are back to present time. Just make sure you don't argue with Beran in the caves besides just briefly talking to him before you talk to Lily, otherwise he just suddenly dies.

Thanks shmerl..
I also poisoned everyone in my first run through as I planted the seed before I found the druid. If you talk to the druid he will tell you that plating the seed will pollute/poison the village.

Is there a way to recruit her as a companion and how?

Yeah, she temporarily joins as part of the main story line. But I wish there was an option for her to stay as a permanent companion.

I'm the last person to ask about recruiting companions, my first run I got almost to the end before I managed to get a full party must have been playing with my eyes shut as I missed so much. :)
As the others said above she joins as a temp companion later in the game.