No matter the island it really comes down to finding a place that has been relatively well constructed, long as you have that anything can be fixed or upgraded. I just bought my place a couple of years ago so I'm fresh out of the process and I looked at quite a few places.
Many are minimal places of course price dictates what you get I mean there are some beautiful places to - all modern construction and so forth but it all comes with the price tag. You can go from a glorified uninsulated tough shed to a sprawling place more suited for a King! So really it's how much do you want to spend and what requirements do you have in what you would be happy to call your island home. When the boss gave me the nod to go after something her requirement was it have a flush toilet and shower. My requirement, that it was a simple building and built by somebody that knew what they were doing. Believe it or not both can be a challenge to find especially the latter of the two. Our budget wasn't very impressive so hey I'm not to proud to admit I was a bottom feeder!
Building new is an option but there are only so many lots available that haven't already been built on. Taking a wrecking ball to an existing place has costs too. Since you have to deal with the logistics of hauling materials either over the ice or by barge, anything you have done is going to cost quite a bit. There are a number of contractors that will do anything you want on the islands so don't think it can't be done. It can for a price. I think for the most part all the contractors are in line price wise with each other.
This is a great place to get information, but when you get serious it's nice to have a RE agent that specializes in island property and can not only answer your questions but be able to give some handy advice along the way. I used Nancy who was awesome and certainly gave me some things to think about that I never had considered as I was going through the purchasing process. Matter of fact in true islander fashion she continues to bust my chops for spending to much time working on my place instead of enjoying it! I'd suggest giving her a call.
http://www.nancydeporter.com/
If you PM me I can give you some inside scoop on a couple places on Bear one that is up for sale right now and another that sounds like it's going to hit the market this spring.