Not sure about etiquette/courtesy if you would be setting up in front of people sitting in chairs, but the public is not restricted from setting up their own chairs at the edge of the water. County code requires vendors to set up their chairs and umbrellas a "reasonable distance" from the water.
What you and I consider a "reasonable distance" from the water the vendors obviously don't. They barely leave enough room to walk in front of the umbrellas and certainly not enough for people to set up chairs. Also, the number of umbrellas put up daily at Adagio is unbelieveable.