1a) Let's say the heroes want to move from Gafford to Orris. Does that occur in a single week or does it take two weeks since there is an island (Cerridor Sea) between the two. I know how to handle the sea encounters but it's the 'in-between' islands that I have a question on.
When moving, the party moves the hero party marker from its current location on the Torue Albes map, along one trail, to a the next location on the trail.
Unless they have an item that lets them sail two trails in one week, it will take them two weeks. They will stop at the Island at Cerrdor sea and 'explore' it (gain 1CT for new area if they have not been there before) but whether they enter the dungeon there (first level is the island level) is another question entirely.
1b) Do the heroes have to explore the island on the way to Orris or can they just 'go by it' and leave it unexplored? Again, how does that effect the passage of time.
They explore the location/area automatically, but whether they enter the dungeon or not is a choice. The first 'island level' is in 'the dungeon'.
If you like, think of it as an area, or a group of several islands. The actual dungeon is only on one of the several small islands, so they don't have to land inthat one if they don't want to, but they still visited and explored that 'area'.
2) Assume the heroes are at Orris and want to move to Shivering Hills. Again, is that one or two weeks due to the dungeon (Queldeon Flood) being located between the two. Similar reasoning as stated above.
Same rule. One trail per week. So they will take two weeks to get to shivering hills and will explore Queldon Flood on the way, which they may or may not choose to enter.