Treasure Island of Doom!

Reward: Captrain Dread's Sword, Gold
Renown: 7500

To get this quest go talk to Salty Jack at the Inn, you'll have to buy him a beer, so do that and give it to him and he'll talk. Accept his wild quest and make your way to Smuggler's Cave.

Dive down and follow the trail, keep going until you enter a room. You'll be fighting several waves of Ghost Pirates here, get rid of all them (I don't think they die again?) and keep going to where you'll be halted by a locked door. Behind you should be a pressure plate hidden by some crates and barrels, step on it to unlock the door. You'll make your way to Captain Dread's room that contains a lock chest, the key to this chest is on the nightstand next to his bed. Open the chest and take the lever.

Go back to the pirate ship and use the lever where appropriate, step on to the ship where you will fight Captain Dread and his Ghost Pirates in a PotC setting. They aren't too difficult, take the helm after you've had your, uhm, way with them. You will be taken to an island where you must locate ten of Captain Dread's treasure chests.

First thing you should do when you are on the beach is turn around and swim to the cove, there is a chest there. The next chest you will find is in the stern of the beached (read: destroyed) ship. Follow the trail up until you get to a small area with a few waterfalls and some land, there is a chest just to the side that you'll have to vault down to. Make your way on to the small landmass and your dog should find a dig spot with a bag near a tree, there is another chest on the other side of the tree. Next there is a dive spot just off the land, where it forks. The next one is behind one of the waterfalls. Now go up towards the cave, there is a gargoyle next to the waterfall, there also is silver key next to the cave entrance. Go into the cave and there is a room to your left with another chest. Past the cave you can vault down and find another chest there. The final chest you will have to follow the trail and cut down a bush so you can jump on the wrecked ship. Now you can take the helm of your ship to return to Bloodstone.