I'm thinking of deleting the southeast islands all together, and introducing a larger landmass connecting the middle east and south west islands.

As for the blue, the map is drawn on a parchment texture background that was made while playing with the Dry Media brushes in Photoshop Elements, which really just gives a less random layered cloud effect. (You can see it on the land, which I'm not sure if I will colour or not. The water was just done with a 50% Opacity blue layer (Actual colour in photoshop was RGB 69,75,147)

I'm thinking of doing a fade effect, copying the blue layer, changing it to darker blue, and then basically smudging it away from the coastline. Apply a Gaussian Blur, and merge.