While the idea of forcing a continent wide move to another continent to spark colonization wars sounds interesting, it also sounds like it'd dump a lot of current players who would be fed up with the idea of having to fight to start something they currently have or would leave if they failed to restart their realm. I think it'd be fun, but that's just how it is and it still sinks a continent which is bound to scare some people off.
If the main problem is player density when compared to the number of regions, Jaron sounds like he has something there. If you simply cut down on the available regions by making them impossible to live in, then the current player base would be forced to readjust their borders. How you'd accomplish this, I can't say, but doing it with something temporary (Blight, sudden flooding of coastal regions that makes them uninhabitable, volcanic eruption that claims regions, but keeps them around) you can reopen them if player density increases (players suddenly have a way to clear the blight, the ocean starts receding, or the lava cools down leaving open territory once more).
This wouldn't necessarily work with every continent, perhaps, but it would work on enough I'd think to cut down the size a bit without sinking islands.
