Love the idea. Hope you don't mind if I put out my thoughts on pushing your idea a bit further.
Basically add a dungeon entrance onto your island. For rewards perhaps there could be some form of island currency used to spruce up your own island in various ways. To prevent exploitation (though the entire game is about exploiting what areas you can) you can encourage people to make stronger dungeons by rewarding the victory of the dungeons over the players and make the only way to get the rewards for completing the dungeons come from challenging a "random" dungeon. You can still take on specific dungeons, but won't get rewards for doing so, or at least have the reward significantly reduced. Also, the dungeons would need rankings depending on both their level and dificulty, possibly by using the lvl number and equipment colors with white for easy and yellow for toughest.
Keep the monsters outside of the dungeon (on the island), but it's likely a good idea to keep them all yellow. Otherwise you're practically making a lvl limit on your island. There is a way around this which imo the mere mention belongs as a seperate post in the idea section. Make islands have a set level. If you go on the island, you are now that level. As the game is so significantly gear based, the stats of gear would have to be changed as well. Adding this to the dungeon idea would also significantly increase the ammount of dungeons people could go to.
Just my 2 cents. Great idea.
Fire fire, burning bright/Shine my way into the night/with thoughts so high, birds in flight/Take me away as mourning might/But as I see the world morn/Stand alone and yet forlorn/A weight for me or from is torn/As they ponder meanings that I've borne