The second island was the Norse race as well. Same models as the Norse from the third island.
As far as B+W3 goes, I'm not even sure it's needed yet. Not from a business point of view at any rate.
The playerbase that visits game company forums and provides feedback on current games, as well as ideas for future games, must comprise less than 1% of the overall playerbase of the game series in question. Since the majority of the other 99% tend to rate games on graphics and ease of play, B+W2 is still going to be considered a great game by most.
So while B+W2 is still considered by most to be a "current-gen" game, and with Fable 3 and Milo in full-swing as Peter's figurehead games, I doubt we'll be seeing a new B+W for a few years.
One thing i'm confident of is that B+W has amazing potential as a wide audience reaching game. Cute furry animals, city building, and large-scale battles (hopefully next time...) advertise the game with attractive qualities for almost everyone. I have a friend who typically hates games, on consoles and pc, but who asked to borrow B+W2 when he saw me playing it the other day. It just looks that fun and interesting to non-gamers. With that in mind, LH would be crazy to drop this IP. It's safe to assume they're just waiting for the right moment, and maybe for that really special, really awesome idea, that a forum member will present one day.