The Five Shires area immediately came to mind, based on the focus on piracy there, and the proximity to shipping lanes in Ierendi, Karameikos, and easy access to the Sea of Dread open waters and the nations beyond. I chose the following island group, as shown on this map clip:
Nothing appears to exist in "canon" detailing this island group, so it seemed open for development.
Then it occured to me, pirates? What about Freeport? For those not familiar with Freeport, it was a mini-setting for the D20 system, consisting of a pirate haven and a couple surrounding islands, meant to be dropped into a larger campaign world.
I plan to simply replace the island group shown on the Mystaran maps with this island cluster, and rename Freeport to Portown (Poor Town or Port Town, cartographers and historians differ on the matter). Freeport could also be a pirate jargon nickname for the town, to confuse authorities.
The group of islands is believed to be the remnants of a larger, volcanic island destroyed ages ago in a violent eruption. With the numerous volcanic islands around Ierendi close by, this isn't too far fetched.
A'val is the largest of the isles, about 4 miles from north to south, and just shy of 2 miles across at its widest spot. Aside from the city of Portown, the island is also dotted with caves, many used as hideouts or lairs by local pirates, and the entire place is said to be riddled with caverns and tunnels, home to a mysterious and wicked race of serpent-men, remnants of a long lost culture that once dominated the region.
Leeward isle is a bit smaller than A'val, just 3 miles in north-south length and barely 1.5 miles at its widest. The main point of interest on this mostly uninhabited place are the ruins of an old potential rival of Portown's, Libertyville. The rocky hill overlooking the ruins of the town was carved long ago, by unknown workers, to resemble a skull, and rumors around Portown claim that among the fools who've tried to revive Libertyville at various times was the little known but mighty in the ways of magic Zenopus. About 50 years ago, watchers stationed at Portown's lighthouse claim that the entire island of Leeward came alive with a fell green glow that lasted a fortnight, and soon, refugees from among Zenopus's servants arrived in Portown, claiming that their master had been destroyed by some evil force he'd discovered and unleashed in the depths of his dungeons. (This replaces the lead in to the sample dungeon scenario in the Holmes rulebook)
Windward island is roughly the same size as Leeward, but its western shores face out to sea that is mostly open for many leagues, creating a rocky, barren coastline. The eastern shores are peaceful stretches of white sandy beach, however, inhabited here and there by small bands of fishermen and crabbers. The largest settlement is a collection of huts centered around a small Inn and Tavern known simply as Felix's. Felix Oliver, the owner, operates a small but lucrative resort business here, catering to the wealthy of Portown and other shady places in the nearby seas. Felix is known for his excellent food, usually buying up the best of the local catch before the rest is taken to Portown for sale. Less known, but perhaps more importantly, Felix has an informal alliance with the Merrow of the waters between the islands, and they often come to his aid if he or the other inhabitants of Windward are threatened.
T'wik is a small island, just a mile long north to south and not even a half mile at its widest. There's not a lot to see or do on T'wik, since it's basically a barren rock, but for centuries, the island has been the site of large bonfires (and, if you go whole hog and use the published Freeport adventure series, a recent attempt to build a lighthouse) used to guide ships to Portown's harbor on stormy or foggy nights.
The only real change I'd make to Freeport to use it as Portown is to increase the proportion of Hin in the population. While most NPCs can keep their assigned race, I'd make a lot more of the commoners and unnamed NPCs Hin.
Due to its location, Portown and the surrounding islands can be a base of operations for pirate or pirate-hunter PCs, or perhaps even a stop along the way to someplace distant...a dinosaur ridden island far to the south, maybe?
Freeport was created and published by Green Ronin Publishing. Some introductory material, including a map of the city can be found at the Freeport section of their website. Scroll down and click on the "Focus on Freeport" link for the goodies after reading the overview. GRP has produced numerous sourcebooks for Freeport, and also licensed other publishers to do so. The GRP website lists a few of these, a search on google will turn up the rest.
Also, if you don't have access to the Holmes edition Basic Rules, Wizards of the Coast has kindly made the Portown/Zenopus scenario available as a free download!