Remember that these critters interact with each other as well as the PCs. (And what are those rust monsters going to eat?) Real-world, islands tend to be primarily inhabited by birds, reptiles, and insects; mammals are present only on the largest islands or where introduced by humans (rats, pigs).
My choices:
Aarakocra: as flyers, they can easily get to/from the island, and spear-fish in the lagoons (a source of friction with the merfolk).
Merfolk (which IMC have dolphin tails rather than fish tails): live and hunt among the reefs surrounding the island. Resent the birdmen taking fish from their lagoons; occasionally ill-feeling has swelled to the point of merfolk being harpooned from above, or low-swooping aaracokra being netted and dragged under the water to drown.
Kobolds: love to steal and eat aarakocra eggs - the birdmen can't follow them into their Small tunnels, and would love to hire the PCs to wipe out the scalykind. Have recently "acquired" some metal weapons from careless pirates.
Pirates: Human(oid) seafarers who use the island as a base of supply/R&R. Their habits of rape and murder have made bitter enemies of the merfolk; likewise they have shot several aarakocra for their brilliant plumage. They are unaware of the rats or the kobolds, though a few crewmen have reported glimpses of "pygmies" among the vegetation.
Moon rats: brought to the island as stowaways aboard the pirate ship, they are rapidly expanding their numbers with an eye to eventual domination of the island. Indifferent to the merfolk, they consider both aarakocra eggs and kobold eggs tasty, and the pirates (and PCs!) useful dupes.