Rinse the rice in a fine-mesh strainer under cool water until the water runs mostly clear.
Add the rinsed rice and water to a medium heavy-bottomed saucepan. Bring to a boil over medium-high heat, then reduce the heat to low, cover, and simmer until most of the water is absorbed, about 12 to 15 minutes.
Stir in 2 3/4 cups of the milk, the sugar, lemon peel if using, and salt. Bring the mixture just to a gentle simmer over medium-low heat. Cook uncovered for 18 to 20 minutes, stirring often and scraping the bottom of the pot, until the rice is very tender and the pudding looks creamy.
In a small cup, whisk the cornstarch with the remaining 1/4 cup milk until completely smooth. Stir the slurry into the pudding and cook for 2 to 3 minutes, stirring constantly, until lightly thickened.
Remove the saucepan from the heat. Discard the lemon peel, then stir in the vanilla and cinnamon. The pudding will continue to thicken as it cools.
Spoon into small bowls. Serve warm or chilled, with an extra dusting of cinnamon and a drizzle of honey just before serving.