Going back to directly answer this:
Now stop derailing this discussion. I am still looking for comments on which approaches would be more acceptable and which ones less, and there are many valuable comments so far.
I think most people (including me) see completely closing an island as the less acceptable, or completely unacceptable, approach. I think it would cause some players to leave the game, and driving existing players away is only going to do further harm to the game.
A more acceptable approach would be to reduce the existing regions on all islands by some magical explanation that's acceptable from a workload point-of-view for the Devs. I'm not in favour of the idea of flooding coastal regions, because it would virtually wipe out several realms on most islands (Caergoth, Kindara, Coralynth, Obsidian Islands, Barony of Maker, Suville, etc). If a region reduction approach was taken, the regions would have to be carefully chosen for balance, and it would have to happen slowly enough for the players to adjust to it, rather than as an overnight event.
I'd also consider the original island merger idea to be possibly acceptable, but not in the way it was originally presented. If it did happen, I'd prefer to see the closed island stay on the merged map and for it to be possible for people on the open island to make expeditionary attempts to recolonize the closed island. Anaris has said he's willing to work on improved undead/monster AI and goal-seeking, and he would enjoy the coding, so why not have the closed island overrun by more aggressive and intelligent undead/monsters once the humans have abandoned it? Then, if several realms band together it might be possible for them to sail to the closed island and beat back the monsters/undead to carve out some areas of the closed island for recolonization. Keeping the closed island in view of the players, and able to be partly recolonized through great efforts, would be great from a RP point-of-view (exiled realms seeking to regain their lost lands, or original realms on the open island launching monster hunting crusades into the closed island), and it also retains some of the large-scale PvE gameplay that appears to have been popular with players in the past. Heck, it might even increase the fun level. Plus, the closed island wouldn't just sink and its history totally disappear from the game, but be available to be fully reopened in the future when the player base grows. At the minimum, I see that as being more acceptable than just having an island vanish.
Anyhow, of the things discussed so far, I think those are the only options that I'd feel were acceptable.