Isolated islands were much more common during beta, they seem to tuned the random variant down a lot, it's hard to find them currently. I found two islands today, messing around through new worlds, but they both were inaccessible by any means. To answer your question: no, hounds cannot attack you in there, neither can't giants (though the area attack might have enough radius to hit you if you are on the ledge). A friend of mine once found one of theses islands but it was big enough to not fit the whole screen so stuff could actually spawn there. It was pretty fun how he tracked a koalephant in a small chunk of land and once the koalephant spawned he had nowhere to go, so he just left him there.