How do you find the signal on Skullduggery Island?
There is a broken mirror on the shelf in the general store.
Once you have read the whole document at the governor's house, you will see a raft through the telescope. Use the mirror to signal to it.
There is nothing to be found on the hidden island (Skullduggery) until after you beat Captain Crawfish. After you defeat Captain Crawfish, the governor gives you a treasure location and a bone shovel. Sail to the hidden island. You will find the treasure under a mound, six paces right from the pirate flag.