Sand on Survival Island is seems rather limited. What I've done with my setup has been farming it and expanding the borders of the island using the sand (and gravel) I've been collecting (using gravity to my advantage to form a barrier, then fill it in to get rid of the water) essentially terraforming my island into a pit until I can harvest all blocks of it and replace my levies with dirt instead. I like what I've been doing, it's a good way to fill in the time while I lack a bed to speed by it.
Right now I have a nice big pit with sand/dirt levies and an island expanded by 10%-25% while I turned the dirt 'X' into a dirt igloo/tree farm, and I have a small dirt dock as my farm. Mobs don't spawn as often as I'd like even on harder difficulties, and even with all the dirt placed, I've yet to have sheep spawn in place for wool crafts (bed primarily) and etc.
I've been making sure that I have a nice setup that doesn't allow water to flow into the pit. It does help that I have a nice steady supply of wood shovels and such to dig out any underwater stuff, as well as hollow out the expansions. One project I am working on is setting up a bedroom with a big window view of the underwater. It'll take some time to get it all setup how I want, but it's so going to be worth the effort. I'm aiming towards developing a tall keep that looks over the entire vast openness and hopefully with magma lighting spots. Essentially, I'm going to work on my style of a lighthouse that extends to the deepest depths.
What has everyone else done with this place?