My theory? This “Forgotten Character Island” was once part of the Underworld, and the portal to it was opened up, when Rumpel used the Olympian Crystal. Everybody but Dr. Jekyll, Mr. Hyde, and Poole have cursed identities, but somehow Neal was able to communicate with Emma (maybe he is aware of whatever emotions Cursed!Neal is feeling?). Just a thought.
Actually, the mishmash style of this place would mesh with different people having different “happy places.”