Some areas are relatively simple, but there is a large part of England where there are no obvious natural subdivisions and for historical ones you have to go back to the seven Anglo-Saxon kingdoms of the Heptarchy, before the tenth century.
The problems can be seen in the attempts by Wessex regionalists to define a Wessex region they can all agree on. Between the shifting boundaries of the historic Kingdom of Wessex, the Wessex of Thomas Hardy and the attempts of Cornwall and some in Devon to assert a non Wessex celtic heritage; the south west and south central portions of the map are problematic.
http://en.wikipedia.org/wiki/Wessex
Region (including)
There is absolutely no problem for a large island such as the Isle of Wight to be its own region.
Regarding Wessex, since the process is bottom-up, as long as the existing Cornwall county council refuses to join the rest of the Wessex councils in applying for region status, it would stay separated. Similarly for Cumbria. "It's the statue, man, The Statue."