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Place rice, water and cinnamon stick in medium saucepan. Bring to boil on medium heat. Reduce heat to low; cover and simmer 15 minutes or until water is absorbed
Meanwhile, bring milk, sugar and vanilla to simmer in large saucepan on medium heat. Stir in cooked rice and cinnamon stick. Cook 45 minutes or until mixture is thick and creamy, stirring occasionally. Remove cinnamon stick. Stir in lemon peel. Pour rice pudding into large bowl. (Pudding will thicken as it cools.) Place plastic wrap directly on surface of rice pudding. Cool slightly
Refrigerate 3 hours or overnight until well chilled