Yeah, I know. I don't have many good ideas for what to do about that.
I have seen Karthan launch attacks on the southern part of the mainland. There's not really a lot that can be done with Karthan though, the two islands I guess needed to be close together because Act 3 had to be on a scale larger than act 1 and smaller than act 2.
Right now, your choices are to use ships to either engage anything leaving Karthan's island in any direction in combat, or give Karthan a free path to land on your capital.