WrpEdit is very good, even in its beta form.
It is free, it will probably be updated, we just need to be patient.
You can import terrain from Terragen and Wilbur, you can also make the terrain from scratch in WrpEdit itself, or you can import terrain from DEMs.
There are one or two other ways, but they require a lot more work. : ))
Even if it is never updated it is still a very powerful tool, and the only tool generally available that allows island creation.