Well first off, make sure the song is saved in "Sounds".
I had the same problem before. What I did to solve it was I made a new music group.
Open up the "music" CGF file. See how it says [Caves] and [Plains] and stuff? To make your song work, make a new one of those. I see your song is named Island, so make a new line and type [Island]. (You can type whatever, really, as long as it's in brackets. XD)
Under that, type: media/sounds/(songname*).mp3 And then type the group name in the song box. In this case, Island.
*Make sure you type down the entire song name. I downloaded a Zelda song and it was titled "05-house"
So I typed: media/sounds/05-house.mp3
Hope this helped~
