Dilanski, that tends to be the trickiest part about it. While theoretically possible, it does take some extra tweaking. The simplest option, based on my experience, is setting it to just generate normal world past the limit of the map you've made, and then going in on the server with WE and VS to make it more seamless. You generally end up with weird biome stuff going on, but since the concept is isles, it's all Ocean biome so it shouldn't be an issue. The only thing you'd be doing is getting rid of the regular sheer cliffs on the seafloor, which would probably be a really quick procedure, depending on the diameter of the world. If we're using your world, lanski, that would take a hell of a long time. Then again, it's necessary to get the effect you want, of the inner and outer rings of islands. So, there is that.
World falloff is a lot easier, but does mean that there's no infinite world, which does seem to go against what a lot of people want out of the server map.
All of that said, between last post and now I've been doing some work on the central island- and since I really like Shadowscythe's idea and I wanted to put what I had learned from the crater tutorial to test, I kinda ran with it. We don't have to use it if you're adamant about the extensive island world, I'm just doing practice stuff.
Obviously in WorldPainter the water from the crater would be removed and would be all open. The interior of the crater still needs some more realism to it, but I'm relatively happy with everything else. Also, this obviously isn't an MC map yet, so it's not entirely representative of what you'll see in the world proper, but it's pretty close. I love the Coastal Overlay macro, it makes the map preview all shiny.
EDIT: It just occurred to me that you all might ask about scale. I have options on that point, I could make that island huge or really tiny, though that messes with the resolution of the thing. As it stands, I'll probably leave it standard resolution, maybe slightly higher, so the island itself will end up being between 550-650 blocks wide. Plenty of space- that's roughly equivalent to far view distance, so while you're in the crater you should be able to see the edges of it on all sides, and on the outside edge you /should/ be able to see the other side of the crater if you've got the render distance pumped all the way up and a decent computer.
EDIT EDIT: Got rid of that odd banding on the crater walls. Looks a lot better.