Hi Dani,
Absolutely, this is a 100% conditional stimulus. The first sentence would be diagrammed as:
Participate in Regional Band
Practice Very Hard or Very Talented
Then we're told that Lily is in the regional band and very talented, leading to the invalid conclusion that she can't practice very hard. Why is this invalid? "Or" in LSAT conditional statements can be inclusive of "and" unless explicitly said otherwise, although it doesn't have to be; think of it as meaning "at least one of" by default. So Lily's being in the regional band means that she must at least practice very hard or be very talented, but both could be true. Knowing that she's very talented thus tells us nothing about whether she practices very hard or not.
Hope this clears things up!