Numbers 1 and 2 aren't interchangable. For something to be in an island, it would have to be really inside the island, not on -- usually. But, for example, when an island is a country, and you think of it as a country, you may use "in":
in the island of Iceland = in Iceland
As for "isle", it's very rarely used as a common noun. Still, "on" is more common.
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