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1. In a large bowl, combine finely shredded lime peel, lime juice, and honey; set aside.
2. If using baby watermelon, cut in half crosswise. Using a melon baller, scoop out flesh. Add watermelon balls or cubes to lime mixture. Add peach and grapes; toss gently to coat.
3. If desired, serve fruit mixture in baby watermelon halves and garnish with lime peel strips.