The island does not actually "float", as it's name would suggest. It was named as such because of the lack of shallows around the place. Ships could be brought within a few lengths of the "shore", and anchored safely, even when the Winter Storms brought the huge waves that pounded the cliffs of the Island. Feroz controlled the growth of coral, and now a great reef encircles the island, with only one wide channel that leads to Port, a port city outside the Wizards' School.
When the first ships of the sea dwarves approached the isle, they saw that it was as barren as the rest of the wastelands, with only a few low grasses and no animal life. But when they set foot on the beach, they found that the draining effect found elsewhere in the world was not present here. It became a port for the Sea Clans, though the lack of fresh water made it unfeasable for anything more than a place to store goods or to harbor during the winter seasons.
Feroz went to the Floating Island, and with the aid of his magics he built the Wizards' School there, and created wells of fresh water. When the Sea Dwarves returned that winter, they were astonished to find a huge, castle-like structure built on their island. They were even more astonished when a black-clad stranger, Feroz, approached them and said he would teach them how to wield magic in exchange for services.
The area of the island around the school is a thriving port town by the name of Port, one with a highly organized underground black market and barter system beneath the hustle and bustle of the hundreds of families that live on the hills around the School. Though the Council of Wizards oversees all of the bureaucratic functions of the town, the subculture living there pretty much does as they please, unless they are clumsy and make waves, in which case the Wizards Council and their apprentices will remove the offenders by whatever means necessary. The town could not exist with the school and vice versa.