It seems multi-dimensional. Isolation allows for parallel language development, but that development could be conservative relative to the rest of the speakers, or it could be heavily divergent.

Basque is an example where there's an obvious motivation for linguistic conservatism: the maintenance of a language that is "untainted" by the constant and unbalanced contact with French and Spanish speakers. There's a need to preserve a language that would otherwise be consumed and die out.

English is actually a great example, I think, of how isolation can lead to divergence. Compared to other languages in its family (e.g. Dutch and German) it's wildly unintelligible, largely owing to the fact that English was spoken on an island where contact with speakers of other Germanic languages was much less common.