I think he must mean the island in the north-east of Panau. We have a map here (at the Maps article with the rest of them) that's older than the release of Just Cause 2.
On that map is a small island in the north-east. In the final game that area is off the edge of the developed map, meaning that it is possible to go there and it is possible to set a map marker into that area, but the map marker in-game and on the PDA map are programmed differently. One will always stay with in the developed map range (the square with Panau) and the other can go beyond. Also, the map marker (seen on the PDA map) that indicates Ricos position will stay with in the developed map limit, even when you're actually 10+ km away from Panau in the ocean.
Anyway, long story short, there's nothing there and the fact that it's beyond the developed map limit indicates that it would be impossible for anything to be there. I've tried to find it by setting a map marker there and thoroughly searching the area by boat and by helicopter.