There are several problems with the current Island, the chief ones are the equipment will need to renewed at some point and the irregular service. Currently while there are two trains an hour there is a 20 minute gap and then 40 minute gap.
For those on the Island it is an important local service, considering the poor local roads and especially important for transporting tourists.
There are have been a variety of proposals over the years for the Island line, and they revolve around doing something when someone bites the bullet and renews the infrastructure. The cheapest and most realistic is introduce a bit more dual track so that the service can become regular with a train every 30 minutes. Other ideas include extending the line to Ventnor again, the trackbed is clear, though one tunnel does have a some utility pipes in it. My favourite and most unlikely is to convert it to a tramway and rebuild it so 15 minute frequencies could be run.
Of course many fear that the line will linger on until someone says "oh dear we can't afford to run it anymore". But if they can turnaround and renew Blackpool tramway, why not the Isle of Wight.