They're both beautiful, but I slightly prefer Lily's sound, but I prefer Lillian because it's much less common. ETA: Wow, I didn't realize Lillian was catching up with Lily so quickly on the charts! So I'll vote for Lily. :)
LillianI really dislike Lily, so I would hope you wouldnt shorten Lillian anyway. I would prefer to see Lillian nn Lily instead of just Lily though as Lily is not a full name to me (unless you are a flower).
I like Lillian. Its my grandmothers mn. However my cousin has a daughter AmberLillian, so if i was to use it as an honorary name i would use Lilly as a mn(its just as nice).
DittoI like both of them a lot, and don't mind Lily as an occasional nickname for Lillian. But I don't like the idea of using Lillian if you only like Lily but want a more "formal" name. Lily works fine on its own, in that case.