The ridiculously massive size of the "impact crater" is 100% intentional, I assure you. The backstory of the campaign is that in ridiculously ancient times (time scales most fantasy worlds don't deal with) the world was a different place and Lovecraftian monstrosities -- well, actually, they were people, just not pretty ones by humanoid standards, but I digress -- waged a war on an immense scale. This giant desert was created by one such event, the detonation/backfiring (haven't decided yet) of a magical weapon of incredible power. The war culminated in the attempted summoning of a god. This was a very bad idea, because gods are as much forces of nature as they are entities, and attempting to bring into the physical world a... thing... of such boundless potential, power, and reality-altering essence does not end well. And indeed it did not. The god, for lack of a better word, shattered, destroying almost all the life on the world and leaving it barren and empty for millions of years. The remaining gods picked up the pieces and hoped (if a dreaming substanceless being of limitless power and nebulous ego can hope) that it'd go a bit better this time. They did their best reflexive and pseudo-voluntary job cleaning up, but some shards of the shattered god remain on the world, bleeding away their power into the tellurian, waiting to be seized upon by beings of ambition to be used to perform great things. And indeed, some have.
Phew. Sorry for the infodump there, but hey, some people were curious. Some of it doesn't make sense just yet, but it's sort of a work in progress, and writing some of it out has given me some fresh ideas. I'll need to do some more worldbuilding. To answer Protopop, it should be clear what happened at Victory Bay: Victory. Specifically, of the psuedo-Roman/Byzantine humans over the pseudo-Islamic dragonmen.
As for the map: I did use the displacement map method to generate some "waves" around the seashore, but I guess it's not so clear. The ocean surface I like as is, but some adjustments to the subsurface lighting are clearly in order. As for the landmass itself, I think I may have to backtrack quite a bit and start from the height map again to add more overall variation and make the desert look more like a crater and less like a flat plain. It'll be a pain but it will be much easier now that I'm familiar with this method of mapping and have added some things to my bag of tricks. I appreciate all the feedback, folks, and I'd like to again extend my thanks to both arsheesh and RobA for their fantastic tutorials. Without those I'd have never touched the GIMP and I'd still be doodling crappy maps on lined notebook paper. Hell, thanks to everyone at this site in general. This is a great community and it's always inspiring to see what fantastic works of art can come out of it. It helps that everyone here's friendly as all hell too.
You telling us a bit more about your setting actually helped me a lot in "understanding" your map. ;) I always like to hear stories that hide behind or within a map, in my opinion they make it more complete and usually explain a lot of its features that look implausible from the real world point of view. I think that many people within the Guild like to hear other peoples' stories associated with the maps they create, so if you want feel free to share yours here. I for one would read it with great interest. :)