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I have only flat rate based on minimum order cost, and free shipping after certain price.

I send to Portugal and Spain.

Both these countries have islands where shipping costs are much more expensive... So I would like to exclude these islands or define specific costs for them...

I can't seem to work out how I will do that.

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Use Table Rates Shipping Module and specify the costs for the Zip Codes Ranges of the islands.

For spain that would be zip codes starting with 07 for Balears (Illes), 35 for Palmas (Las), 38 for Santa Cruz de Tenerife, 51 for Ceuta and 52 for Melilla.

For protugal you'd have to have a look yourself.

This will explain how to configure your table rates in detail: http://www.sitepoint.com/set-up-table-rate-shipping-in-magento/

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