It is the sixth, small island that is foggy. It is the real "Skullduggery island". It is just southeast (down and right) from the Pirate Outpost, and directly west (left) of Golden Harbor.It will...
First you need to get a full crew. Then save money to get the Phoenix Warbird (1,000,000 doubloons). Then defeat Captain Crawlfish. Go back to Fort Ridley there they will give you a shovel and map....
There is nothing to be found on the hidden island (Skullduggery) until after you beat Captain Crawfish.After you defeat Captain Crawfish, the governor gives you a treasure location and a bone shovel....
To get the treasure you must first complete the whole island. Go around different islands in the archipelago trading items and earning money. Save enough money for a Phoenix Warbird and a full crew....