Black Lamb and Grey Falcon by Rebecca West is the essential book on the former Yugoslavia, written after a journey through the country in 1937. The sections on Dalmatia — including the islands — are among the finest travel writing of the 20th century: dense, opinionated, and alive to the layers of history that produced the landscape you see. It is a long book but no other account of the region comes close.
Croatia: A History by Ivo Goldstein is a useful single-volume account of Croatian history from antiquity to independence, providing context for everything from the medieval stone towns to the traumatic 1990s war. Not bedside reading, but a good reference for anyone wanting to understand the history behind the landscape.
The Radetzky March by Joseph Roth, set in the twilight of the Habsburg Empire, is fiction but gives an extraordinarily vivid sense of the cultural world that shaped Dalmatia before 1918 — when the coast was part of the Austro-Hungarian empire and places like Pag were administratively Italian-speaking. The novel is set elsewhere but the atmosphere it evokes is directly relevant to what you will see in the stone towns of the Dalmatian islands.