The mystery island is, in fact, Stilwater from mission 1. The part that takes place during the mission that you are physically playing in is a small chunk just outside the edge boundary. Whopper265was able to glitch through the boundary somehow (he doesn’t know how he did it either) to get there.
We now know it’s Stilwater because Corrodias loaded a zone with the following command:
Forcing this code on startup in the main function of sr3_city.lua actually extended the island further into the playing boundary and connected the two. He was able to walk right up to the boundary and see past it to the small chunk on the other side."