I believe eventually if you dig down far enough into the dirt you’ll hit rock. that might not be the case right now, but it should happen in the future. in that case, you can, technically, make a dwarven settlement on an island. it wouldn’t really fit with dwarven lore as dwarves love mountains and hate water, but hey, whatever mines your hills. what you can do right now is dig a “mining tunnel” down underneath the water and have it go to a mountain. it’ll be a relatively safe path (unless monsters just so happen to spawn in the tunnel), so your dwarves can go from your island to a mountain without worrying about getting attacked.