Only thing that came to mind was Maupiti Island, doesn't really fit ALL of your clues but worth a shot...
I would also like to take this opportunity to re-post my own mystery game:
It's a long shot but Black and White maybe? http://www.ign.com/games/big-metal-box-2/pc-3897
Though I doubt you would forget to mention you are a god and you have a huge-ass pet :)
Another I can think of is Tropico, there's an island, people have babies, go to school, get jobs, has sequels...
Sounds like Stress Relief (http://www.freegames33.com/index.php/detail/Stress_Relief)
Could be Future Cop: L.A.P.D
And now: hello, beautiful thread, lots of memories.
A game that I've tried to track for a couple years now:
2D, some later 90s or early 2000s, I remember it being some...
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