I'm not a vegetarian but lots of people nowadays are. A common question that I've been getting is "What's a good vegetarian restaurant in Chinatown?" This question has kinda got me stumped the last few times; especially since Vegetarian Paradise went out of business.
I know that the new popular vegetarian hotspot is on Pell Street (cross streets Bayard & Bowery). I haven't personally tried it but it's called Vegetarian Dim Sum House.
Quite frankly, I think that you can eat excellent vegetarian dishes at any Chinese restaurant. Chinese people actually eat a lot of veggies. Some excellent recommendations for vegetarians out there is the bok choi or the Chinese snow peas. Vegetables dumplings are readily available at most Shanghainese restaurants such as Moonhouse and New Green Bo.
I also know that the owner of Fuleen Seafood Restaurant (11 Division Street) is a Buddhist vegetarian. I'm sure that if you asked him, he would be able to recommend a lot on his menu that is veggie friendly.