Upvote:1
According to Wikipedia, this might be based on the romance novel Las sergas de Esplandián by Garci Rodríguez de Montalvo, which contains the first written mentioning of the Island of California.
It is probable that this description prompted early explorers to misidentify the Baja California peninsula as the island in these legends.
Upvote:8
So, in researching the link from sbi, I think he's got one piece of the puzzle, but there seem to be a few more.
Put them together, and you have an island.
Given the resources at the time, and a surfeit of targets for exploration, it makes sense they would have said, 'This is an island, we'll get around to mapping it later.'
That this was not an island was realized in 1744, when an overland expedition proved it be part of the mainland.