Nope, it is definitely those little 'glass worms' that Desertponder mentioned.
I had an infestation too a couple years ago, and if you don't have perfect eyesight, you would not be able to see these little glass worms.
They are not more than 1/4" long when full grown, and most are much smaller than that and about the width of a cats whisker. Clear as glass.
You can buy Safer Brand Caterpillar Killer too, which uses a type of bacteria to kill the caterpillars, totally safe for all pond critters and all critters that drink from the pond.
The Safer Brand Caterpillar Killer comes in a little 8 fl. oz. jug that is a concentrate. (comes in bigger sizes too but the 8 oz. jug lasts all season for me) You must dilute it, and then dip your lilies into a bucket of it so they are completely covered, dunking all the pads under several times so even the surface of the pads come into contact with the dip. Good to have some kind of large half wine barrel sized container to do this. Do not throw out any leftover 'dip' mix, just cover the barrel so it doesn't evapaorate or get watered down by rains, and reuse. And it's a good idea to dip your infested lilies and other plants every other day for about 2 weeks to get rid of all the eggs and generations of the glass worms that hatch from any eggs. The Safer Caterpillar Killer only kills the caterpillar larva, does not work on any eggs. But it works great and isn't a toxic chemical, but a natural biological caterpillar killer!
