I'd like to delete my island and I can't find out how. I'm sorry if I'm being annoying but if I can figure out how to delete the island I think I can do the rest myself.
You can select the terrain in the "Hierarchy view", and then choose the delete option from the Edit menu.
But, instead, I recommend to use the "New Scene" option on the File Menu, and just create a new scene. You will have access to all the stuff in the project pane, and won't have to worry about floating models, etc.
Here is a good tutorial on creating a new terrain:
http://www.unifycommunity.com/wiki/index.php?title=Terrain_tutorial
First I advise you to keep the Island and make a new project or scene.
The advantage of new scene allows you to use old prefabs. New Projects starts completely New though.
But if you insist on deleting:
Go to the hierarchy panel and click on all gameObjects (except Camera) and choose delete option from Edit Menu.