You can get to the Isle of Sands immediately if you've finished the Shrine of Anephas. Go out the back exit, kill Bloodbeard and his crew, grab their ship, and sail down the west coast. Look for an entrance on the far west side of the Lost Sea.
Make sure you get the quest for killing the Hydra from the Town Hall first! It's worth 10,000 XP and 10,000 GP. You have to kill the 3-headed hydra to get into the Isle of Sands. (See picture below)
Good luck!
-Sazerac
P.S. The Red Dragon is not a part of this quest. He just happened to show up as well when I played it.
-Saz
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