The Island is actually a sort of prison.
The reason Miis don't leave the island? They're not supposed to under any circumstances.(except to go on vacation)
The Miis have been sent here for whatever grievous crime they've committed. Their apartments (and houses, if they marry) are just really fancy prison cells.
You (and the Mii representing you) are actually the Warden, basically keeping watch over the inmates. You decide what they wear, what they eat, and many other things. The Miis have no choice but to accept your decisions as to what happens to them.
As for any children born on the island that grow up? They have a choice between being doomed to live with their inmate parents, or become travelers and escape their fate (Since they didn't commit any crimes).
Any Miis that end up 'erased'? They were actually granted a pardon, and are now free to go (or perhaps they hadn't actually committed the crime they were accused of, and were found innocent).
The only time that Miis can temporarily leave is for vacations (which, of course, you supervise). Each Mii that is on the island simply is accepting whatever punishment they feel is right, in the chance that they're trying to make up for their past crimes.
The Island is some kind of Olympus or Valhalla.
Have you noticed that one Mii News story where everyone is surprisingly nonchalant about the Olympian Skydiver story? They're on a slightly lower level than both you and anybody who seems to come to the apartment that day. The cafe discussion about having a "chin of a Greek God" no matter what everyone looks like is out of familiarity...and more than a little nonchalance.
Their odd sizes and dimensions and general weirdness are a result of trying to look natural for your sake. It also explains how they can have a vacation and take photos in all of two minutes, utterly breaking time flow that normally syncs right up with the real world.
Your Miis aren't weird, the cafe's service is just that bad.
You'll notice a pattern with the hangout chats after a while: everyone forgets, then suddenly remembers there's a secret menu, that they should totally get tasty food while they've got food right in front of them, and that they talk about ordering absolutely anything and everything on the menu (read: that happens to be in the Food Mart.) You try balancing a menu the size of a phone book and keeping it all straight. Luckily everyone seems not to mind all that much, content to keep on talking.
The island is a commune.
They all seem to have part-time jobs, yet still have to rely on you to feed them, board them, and buy them clothes. They also hop around from job to job, and seem to suffer no consequences for leaving work when you summon them (note that when you summon a Mii from their job, they don't go back to work once you leave). The reason for this is that the island is actually a communal society, and their "jobs" are simply volunteer work.
The island is a peculiar sort of experiment.
A team of respected biologists have done the impossible: the creation of fully customizable, sentient life-forms. Ones small enough to fit in a teacup. They call them "Miis." But they act in...peculiar ways. Hence they manage to get a willing volunteer (you the player) to have a look-alike made, alongside a Mii-mech for you to control for the sake of assisting these...'precious' life-forms (explaining how one can actually see apartments from the middle out, for instance).
The anonymous shopkeepers are island natives...
...while the imported Miis traveled in from elsewhere (bonus points if they were
from another island). The people that serve as shopkeepers were on the island before your first Mii moved in. Fortunately, they seem to have good ties with the Mii inhabitants. Too bad you don't interact with them much outside of shopping, unlike the Mii islanders.
Adding on to the above WMG, all the Miis you create moved in from the island in Collection.
- It is possible for Miis in Collection to say that they want to escape from the island... So they can live on another. Maybe, all the Miis you create in Life (sans your lookalike) actually are escapees, and the message you get whenever you delete Miis was phrased so strangely because you forced them to go back there.
Erasing Miis is in actuality, an assassination
It costs $21 to erase a Mii, and no trace of them remains at all. Let that sink in. And going by that logic, erasing the game's data is mass genocide, leaving nothing behind to show that life ever existed. This sounds more like a dark young adult novel or manga than a bubbly, funny game. No wonder the island was just given away at the first chance when you open the game for the first time...
- Pair this WMG with the above one about how the Island's a prison and suddenly that WMG gets darker. And, mind you, that WMG was already decently dark.
The games take place
In a World… which has no big landmasses and just consists of smaller islands
Hence why the travellers get to visit so many other players, but never get a chance to visit the mainland - there is none!
