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Not really trying to convince you on this GP given your previous statements on Apocrypha Mystara sources in general, but here is an idea that takes some of your criticism into account trying to make the setting more Mystaran and less generic.
Islandia of the Alatiansby Håvard
In the days of Nithia, the lands south of the Empire, covering today's Karameikos and Thyatis were inhabited by people currently referred to as the Traldar. The western part of those lands soon fell under the influence of the Hutaakans. However, the eastern parts, as well as some more western coastal villages were more independent and gave rise to a more seafaring culture. It was these Seafaring Traldar who eventually gave birth to King Milen who lead his tribe across the Sea of Dread and founded the Milenian Empire. Another group had by then began exploring the seas to the east. They were known as Minaeans. Some of them made it as far as Skothar and became the ancestors of modern day Minaeans. Others settled in the islands south of the Isle of Dawn. As the Pearl Islands were already being settled at this time by dark skinned Tangor from Skothar, the Traldar settled on the at that time uninhabited Alatian Islands. Here, they founded a unique culture known as the Islandian Traldar.
The Islandian Traldar ran into conflicts with humanoids of the region, and were also occasionally troubled by Yannifey and Northern Reaches raiders from the north. They enjoyed some trade with the Nithian Thothia colonies and acquired from them rather quickly knowledge of use of iron and construction, building impressive castles. But forces of darkness were also present in these lands. Brought over, perhaps also from the Nithians were ideas of Entropy, leading to dark cults such as the Brotherhood of the Bolt. Slavery was also common on the islands, and even the more sympathetic rulers brought their subjects into harsh serfdom.
War and strife would have it that the Islandian Traldar civilisation would not last long. A few centuries after the Alphatian Landfall, there was little left of this culture. The islands were overran with settlers from Alphatia. These were Alphatian lacking magical ability and seeking new opportunities outside that magic dominated Empire. In AC 730 the Alphatian Emperor began his beautification process of the region, forcibly removing the population of the islands to make room for his own eccentric projects.
The Islandia culture was now completely destroyed. But Immortals such as Minroth, Korotiku and Ka worked together to transplant those left of these individuals into the Hollow World. Here, they were relocated to the Wintillan Island chain. Little remains on the outer world of the Islandia Civilisation, but occasionally, creatures known as Bolt Wraiths (or Evil Black Floaties), undead creatures once created by the Brotherhood of the Bolt, appear near ancient and now forgotten ruins, like those of Wentworth Castle on Aegos...