Lost sight of island in dismal conditions (7)

I believe the answer is:

mislaid

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'lost sight' is the definition.
'mislaid' can be an answer for 'lost' ('mislay' can be a synonym of 'lose'). I am not sure about the 'sight' bit.

'island in dismal conditions' is the wordplay.
'island' becomes 'i' (geographical abbreviation).
'in' is an insertion indicator.
'conditions' is an anagram indicator (letters must be in a new condition).
'dismal' with letters rearranged gives 'mislad'.
'i' going within 'mislad' is 'MISLAID'.

'of' acts as a link.

Can you help me to learn more?

(Other definitions for mislaid that I've seen before include "Temporarily lost" , "not to be found?" .)

I've seen this clue in the Sydney Morning Herald.

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