I now have a visible island, but the land surrounding the runway behaves like water.
Once you've created the cutout for the island you need to copy that portion and then apply a land class texture to the area.
If using SBX to make the work it goes like this;
1. Exclude water with a small polygon
2. Make a new water polygon that fills a QMID 11 boundary area, in SBX I adjust the transparency down to about 35 so I can see through the poly
3. Make a new polygon within the water for where the island will be
4. Right-click on the island polygon and select Set as Hole, which will prompt you to click on the "Parent" polygon. That's the new water polygon in step 2. Clicking needs to be precise in SBX to get it to take. Once it does take the hole polygon will turn white.
5. Click on the edge of the water polygon and select Edit | Copy and then Edit | Paste. The cursor will have Paste at the end, so find a spot away from the original Hole polygon and click. A copy should appear. Press Escape to quit pasting or every mouse click will make a copy!
6. Right-click on the copy of the hole and assign it a land class texture
7. Move the copy of the Hole back on top of the Hole polygon to where they are stacked on top of each other. Zooming in may be required to be precise.
8. Save, compile, copy the cvx_XXXXXX.bgl file into FSX and see if the water is gone.