I've been working on an island recently using terraforming, and this is what I have come up with.
the island was based off this image I found
A few alterations were implented as you can tell, but here is the gist
1. The Plateau will be used for "upper-class" housing, the spot to the right where you can see an increase in altitude will be used for a fortess.
2. The Lagoon / Port will be used for docking and as an access port, it will also contain a small marketplace, and act as a fishing village.
3. The Inner Lake will be used as a hub for its surrounding villages to transport to each other.
4. The location between the forest and the lagoon will most likely be mid-class housing.
5. The jungle will have extensive trails and contain remote settlements for groups.
Any suggestions, questions, and requests for screenshots of areas you want to see should be posted as a reply.
EDIT:
Experimenting the volcano as a battle dome.
SCREENSHOTS
A view of the inner lake at sunset.