Lounge Dad and I included, it's sweet (8)
I believe the answer is:
lollipop
'it's sweet' is the definition.
(lollipop is a kind of sweet)
'lounge dad and i included' is the wordplay.
'lounge' becomes 'loll' (both can mean to sit in a relaxed way).
'dad' becomes 'pop' (synonyms).
'and' says to put letters next to each other.
'included' indicates putting letters inside.
'loll'+'pop'='lollpop'
'lollpop' going around 'i' is 'LOLLIPOP'.
(Other definitions for lollipop that I've seen before include "Confectionery" , "sucker" , "children love it" , "Sweet for suckers?" , "Sucked sweet" .)