Lotus Tea House on Regina in Waterloo is fantastic - the spicy braised eggplant is divine.You'll find some great veggie options at Seven Shores, further south on Regina. Zen Garden in Cambridge (Galt Centre) is also quite good.
Jane Bond on Princess St. W. in Waterloo http://site.janebond.ca/ I was here several years ago and really enjoyed it. Looks like it's still getting good reviews on Urban Spoon & tripadvisor. If you go, let us know how it is.