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It is shown that the castle resets itself and goes back to its original state. However, the number of skulls keeps on increasing with every iteration. That would indicate that the lake does not reset, only the castle does.
The doctor initially finds in one room a tile missing with arrows pointing towards it. Later he digs up and finds a tile with the engraving "I am in 12".
Why did the tile and the arrows not reset?
The room with the missing tile and the arrows never seems to change - it's the same every time we see it - so there's actually nothing to reset, except the tiny marks made by the Doctor when he touches the sand in the hole left by the tile. As for the place where the Doctor's digging, it doesn't reset while he's there (none of the rooms reset while he's there; they only do so after he leaves), but it does reset after he leaves: back to the state we first saw it in, with the earth patch and the tile still buried since he never took it out. We actually see this in the episode, while the Doctor is saying these lines:
DOCTOR [OC]: I saw the whole castle move, when I made the creature stop.
(Back in the garden, the grave is filled in again.)
DOCTOR [OC]: Every room, if I leave it long enough, reverts to its condition at the moment I arrive. It tidies up after itself.
(The flowers are in the bedroom vase, intact. He remembers plucking the petals.)
DOCTOR [OC]: Automated room service.
In response to OP's comment: the tile was already buried when the Doctor first arrived. He couldn't have buried it himself in the first iteration, precisely because if he had, the rooms would have reset and he wouldn't have found the tile missing in the later iterations.
They do reset - these are clues left by the building to lead the doctor through the castle (lots of chances for the Veil to catch him) and to the final room.
We never see him discover Room 12 himself and bury the tile. The tile was always buried for him. The shovel and the pile of loose dirt were always waiting to prompt him to dig.
The resetting of the missing-tile room is minimal - I think he brushes the sand - but the resetting of the garden where he digs means putting all the dirt back.
All rooms periodically reset themselves to the state that they were in when the Doctor arrives. The system cannot tell that a new iteration of the cycle is not the Doctor arriving for the first time, and so reverts to the way things were when the teleporter last resolved/the most recent copy of the Doctor was loaded.
The first time the doctor arrived, we know things did not play out in the same manner as we saw - no-one would have written 'bird' in the sand, for example. We also know that it takes around a day and a half for the doctor to expire after being caught by the Veil. The rest is speculation: after the Veil deactivates, the cycle is over, and the castle will no longer reset. 'Doctor one' will thus just about have had time to put all the clues in place before loading up the next iteration. The dial/castle/Veil is unaware that the state of things upon the loading of 'Doctor two' is not the default, and will take that as a new baseline, leading into the repeating sequence that we saw. More likely is that it took a few iterations, each positioning small clues into place, before the cycle as we know it began.
Potential issues:
* The word 'bird'. Either that shouldn't need rewriting each time or it should already have been erased before the Doctor sees it.
* The dry clothes. Though it's entirely plausible that 'Doctor one' mentally simulated the results of future iterations and left his own clothes there, or that the first Doctor to go for a swim left them there to dry, foreseeing that that manoeuvre would be repeated
