Taylor Today

updated 10/02/2006 AT 01:00 AM EDT

originally published 10/02/2006 AT 01:00 AM EDT

She has survived a brain tumor, addiction, the wrath of the Vatican and eight marriages, including one to an abusive relative of Paris Hilton's. So don't expect Dame Elizabeth Taylor to be afraid of a few sharks. In fact, as she was submerged in a shark cage off the Hawaiian islands one bright morning last August, she was downright giddy—even goggles and a snorkel couldn't hide her smile. "There were 12 sharks cruising the cage!" says Taylor. "The water was very warm. It was beautiful. I had a T-shirt on that said 'Shark Bait.'"

Sitting in her Bel Air, Calif., living room, Taylor, 74, lets rip with her unforgettable little-girl cackle. The carpet is white shag; her hair, jet black. A huge fish tank gurgles nearby, while her white Maltese Daisy never strays far from her side. During an interview she returns to the topic of shark diving several times. It's her way of saying that the tabloid reports of her impending death are greatly exaggerated. "My son called me just after I came back from Hawaii," she recalls. "He said, 'I saw in the supermarket, "Liz Fading Fast."'" She rolls her eyes and says sarcastically, "Now, I really look like I'm fading fast?"

In fact, Taylor is determined not to fade at all. These days she remains a dedicated AIDS activist, campaigning for stem-cell research and funding a $500,000 mobile HIV/AIDS care unit in New Orleans. After 25 years of speaking out, Taylor still trembles with outrage when talking about the disease. "People have become so lethargic," she says. "Teenagers mainly—they just don't believe it can happen to them." This year her White Diamonds fragrance celebrates its 15th anniversary, and Taylor herself has helped develop each of the 11 scents in her House of Taylor beauty line, most recently last year's Gardenia perfume. She's also busy designing her new jewelry line, available at select jewelers nationwide.

And this may be the most interesting development: A source close to Taylor says the star, who divorced her last husband, Larry Fortensky, in 1996, quietly has been dating a wealthy divorcé for two years. Taylor won't comment or name names.

As for turning 75 in February, "I love it!" she says. "I'm going to celebrate it by going shark diving!" Still, Taylor's health has always been a constant battle. She has endured severe back pain, numerous hospitalizations, a bout of pneumonia that left her with a tracheotomy scar and two trips to the Betty Ford Center for addiction to alcohol and painkillers. Richard Burton—whom she married twice—"used to say I was incident-prone, not accident-prone," she quips.

Osteoporosis and scoliosis now keep Taylor in pain and often in a wheelchair. "I find it very hard to stand and to sit too long," says Taylor, who is retrofitting her pool so she can exercise. Still, she's never lost her gift for glam, showing up for her PEOPLE chat wearing a stack of jewel-encrusted charm bracelets she designed and the massive 33-carat Krupp diamond on her left hand. She laughs about the rubber-soled sandals on her feet. "These are the only shoes I can wear because my feet are so swollen!" she explains. The ability to poke fun at her image—even when it came to her fluctuating weight—has always carried Taylor through: "If you can't laugh at yourself, you're cooked."

Back problems, she insists, won't keep her from traveling on business; in the next year she plans to go to Switzerland to promote House of Taylor Jewelry. While her partner, model-turned-mogul Kathy Ireland, creates more affordable pieces up to $3,500, Taylor—whose private trove of jewelry rivals royal collections—is designing sparklers that can cost more than $1 million. "I've been doing it all along," she says, "suggesting to jewelers that I wanted this, that and the other. My manager said, 'Why don't you do it for real?'"

Taylor sometimes wakes in the wee hours with an idea for a bauble and sketches it out. Other sleepless nights are spent in more mundane ways: watching reruns of "Law & Order—murder, mayhem, all that good stuff." Her hillside home, where Taylor has lived since 1982, is modest by Bel Air standards, save for paintings by van Gogh, Renoir and Modigliani above the sofa and Oscars for Butterfield 8 and Who's Afraid of Virginia Woolf? on the shelf. Her four kids ("my best friends"), 10 grandchildren and three great-grandchildren visit often.

Taylor points to a dozen bronze horses next to her fireplace and says proudly they were made by her daughter Liza. "I wanted them to not live the lives of a movie star's children," she says. "They had to get jobs." She considers producer Mike Todd and Burton her great loves, and though the Taylor-Burton relationship is legendary for the drinking, fighting and passionate reconciliations, her own memories are more mellow. "If we had a fight, it was so pumped up by the press," she says. "It was nothing like what actually happened. Sorry to disappoint people."

These days her ideal evening is "to go to a restaurant with a small group of very close friends." But she's still Elizabeth Taylor and brings along a bodyguard "if I'm heavily bedecked" in her cherished rocks. Her current romance may not be generating headlines, but it's good to know she hasn't given up on love. And if a wheelchair can be limiting, "I don't regret that I'm stuck in this thing because—hell," she says, and laughs again, "if I can go in a shark cage, life isn't all that bad."

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