Island regions: City or Castle?

[Sentinel]

For the about the same cost of defending a high level castle with 1 unit of heavy infantry you could defend a high level city with 7 or 8 units of infantry (6 are free). These extra units will give you a better defence than the extra walls that the castle has.
If you also then factor in, how many extra units you could permanently garrison because you are generating a lot more cash from the city, then the city clearly is the stronger option. As your borders expand, and therefore the risk to this island decreases, you can used part of the garrison else ware and pocket the cash.

[PseRamesses]

Simple - if you can build a port convert to a town. Playing some factions where the distance to the capitol or religious unrest is high. Leave it as a castle for a while until thing settle down, then convert.
As the turks not many castles are needed. I usually pick Aleppo and one more in the east. Going into Greece and the Balkans I add Sofia to the castles. Going into Africa Dongola might become a castle too.