Players should treat characters as difrent people, not extensions of one entity, called family.
Has anyone had their characters be in conflict with one another?
In general, yes, my characters Vladamire and Aramon loath each other. The former is a hansom demon worshiping sociopath whose the scion of his family and the latter is a scarred and tattooed freak that tries to be honorable to a fault and is a black sheep for it.
If we were to switch to a one character per island system I would only have one active character. I have a job and a family, I just don't have the time to keep up with the faster playing islands in BM anymore, which is why I'm only playing in the Colonies now. I kind of like the system we have in place now, but if I were to make one change it would be that players only have one character in a position of power across all the islands. I think that would open up positions for other players to get in.