Well, I like your project, it adds another facet to the topic of keeping rabbits. It's not exactly how I would do it, mine are both lifestock and pets, and I havn't an island at my disposal.
Rabbits are perfectly fine outside, when their needs are met, mine live in hutches and are out during the day, my fences are pretty symbolic and about half of them ignore them, no problem, they don't run away when they grew up with that kind of freedom. The only rabbits I lost to foxes didn't have the chance to bolt and hide underground, they were plucked from a (now improved) hutch.
There were 2 escapees from the very first litter, two does, after two weeks I simply didn't have the heart to capture them, they adopted to living in the wild so well. They became mascotts of the neighbouring demolition waste recycle plant, and I met them now and then for 3 years until I moved away, they found themself a wild romeo and had offspring, lived a solid, normal rabbit live. Of course there were things like parasites, but I think they had a good life (if I had caught them they would just have got an invitation for dinner...)
The japanese island, they deal with rabbits in a different way, might look strange to some, but imho those rabbits still have a better life than 90% of pet rabbits. I don't know much about it, but I wouldn't call it a disaster just because it's not the way I think what the right way is.