We study the continuum limit of a nonlinear Schrodinger lattice model with both on-site and inter-site nonlinearities, describing weakly coupled optical waveguides or Bose-Einstein condensates. The resulting continuum nonlinear Schrodinger-type equation includes both nonlocal and nonlinear dispersion. Looking for stationary solutions, the equation is reduced to an ordinary differential equation with a rescaled spectral parameter and a single parameter interpolating between the nonlocality and the nonlinear dispersion. It is seen that these two effects give a similar behaviour for the solutions. We find smooth solitons and, beyond a critical value of the spectral parameter, also nonanalytic solitons in the form of peakons and capons. The existence of the exotic solitons is connected to the special properties of the phase space of the equation. Stability is investigated numerically by calculating eigenvalues and eigenfunctions of the linearized problem, and we particularly find that with both nonlocal and nonlinear dispersion simultaneously present. all solutions are unstable with respect to a break-up into short-wavelength oscillations. (C) 2004 Elsevier B.V. All rights reserved.