While it has been told that while Sonic & Co are living in islands and humans are on continents I think that Sega and the Sonic Team f-ed up with how they introduced them (and how they've ditched the american canon in favour of the japanese one without even asking nor trying to conciliate the two).
Even if Adventure was well received back then, seeing Sonic suddenly casually talking to humans in a realistic city with cars and buildings as if he always lived there while in his previous game he didn't felt jarring to say the least. It's almost as if Sonic Adventure was a soft reboot of the franchise rather than a sequel to the Genesis (and Saturn to a lesser extent) titles.
At least they managed to make Robotnik/Eggman still named both as Eggman was a mocking nickname from Sonic ("Look! It's a giant talking egg!") and still referenced previous areas in the franchise like Angel Island with Ice Cap being the eponymous level from Sonic 3 or previous characters like Metal Sonic in a container but sadly they removed that kid telling about Little Planet in the English Localisation.
(Translated version there)
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I think Sonic suffered from a massive localisation issues.
And yes, South Island is more than just Green Hills... There are many traces of an ancient civilisation (which may be birds as we see them) and maybe Longclaw is a reference to that. Green Hill is iconic but not the sole representative area of Sonic 1. What is even Starlight Zone btw? A city?