Put apples into a deep casserole. Combine 1/4 cup sugar and the water in a saucepan; bring to boil.
Pour syrup over apples. Cover casserole and bake at 350F 30 to 40 minutes or until apples are tender, basting occasionally.
Pour ale into a saucepan and heat on low heat until it foams.
Add spices, sherry and 1 1/2 cups sugar, lemon peel and lemon juice. Heat, stirring until sugar is dissolved.
Remove from heat and allow to cool for 20 minutes.
Reheat mixture and pour through a double thickness of cheesecloth into a heat resistant punch bowl. Float apples and serve, garnished with lemon peel.