That doesn't work. Give the isolated island a technological advantage, and what you get is England's empire over which the sun never sets. Had Japan realized that the musket was about to give them a technological advantage over their larger hated neighbor, they would have - and did - immediately change from isolationists to rabidly agressive imperial expansionists. If they had done that in the 16th century rather than the 19th, we'd have been talking about Japan along side England and France as one of the world's great colonial powers.
What you have in the situation of guns being invented somewhere and the whole world colluding not to take them, is precisely the scenario I originally had argued was impossible - because it requires just one member of the community - whether or nation, group, or subculture - to secretly break the agreement in order to gain the clear advantage there by and the arms race is on. Heck, you don't even need that - you just need the belief that your enemy might be secretly doing that to persuade you to do it too. What you have is a prisoner's dilemma where the prisoner gets a much better deal by betraying the others. If the 'others' are anything less than loved like brothers, the outcome is obvious.
Only if:
1) The nation is interested in expansion
2) The island has enough trees for a vast armada of boats
3) The nation is populous enough to stand against all other nations
China had crude had firearms as early as the 1300s
and boat-making technology capable of reaching North America. Yet somehow they failed to take over the entire world. But they didn't because they did not consider the rest of the world as worth conquering.
Likewise, canons and guns made their way into the European and Arab worlds as early as the 14th century but it took four-hundred years for them to slowly replace and rewrite all the established rules of warfare. People don't react well to change and people in positions of power are not always able to recognise the potential of new weapons and ideas.
And even if guns have been around long enough to be slighly more common, that doesn't mean methods of construction or creating gunpowder would be common. It's been shown on
MythBusters that even knowing the ingredients of black powder
and ratios of the ingredients does not always produce a usable explosive. The knowledge of black powder could be a "secret recipe" kept hidden by gunsmiths and masters and only taught to apprentices.
Introducing guns to a world is not going to suddenly cause a wave of interest in firearms and vast revolutions in military technology, especially if there simply are not enough guns to equip an army. In the same way many modern replacements for soldiers or military gear have not become widespread because the individual cost is too high and the reliability is not there yet.
There's enough situational wiggle room for DMs to design multiple campaign worlds with guns that have plausible excuse for why guns have not spread everywhere. No, they may not be perfect but they're good enough. No more absurd that many other design flaws that creep into designing a campaign or a fantasy world. You just need a reasonable reason to give to the players when they ask "why doesn't everyone have guns?" to satisfy them long enough to re-hook them with the adventure.