First thing I noticed was the fact you have decapitated the "t"... it seems odd as I now read it as isle "crealive" or even "creajive". It's made odder by the fact the letter "l" managed to keep its head.
you're also going to want to watch your areas of negative space. as you reduce your logo, they'll block up or worse, end up looking like part of the letter. specifically, the line under the curve of the "a", the space where the curve of the "a" meets the "e" (on the top and bottom), and that space in between the "i" and "s". have you tried it eliminating those pieces? worth a shot just to see.
It doesn't really say creative. What's the thought behind the outline thingy? And the random Ladies' hat thingy? Why crop the t if the L isn't, and then have the hat thingy aswell? I dunno, it's all a bit random.
I saw Creative right away. The OP is shooting for a clean straight line across the "tiv" of creative.
The word Isle seems to be working a lot better than the creative and I think it's mostly because of the color combination. The two aquas work together but the darker blue you have chosen has too much magenta in it and it clashes (at least on my work monitor). You might want to check a dark blue more on the cyan side.
fill the center of the A in creative.
Rethink your attachment of the "c" to the "r", the "a" and the "t", and the "v" and the "e" in creative. Just because the program puts the outline there doesn't mean it's correct or you can't do anything about it.
I like the second, colored version of the logo. It would have been innovative in the eighties. Right now rainbow colors in a logo are a little overstretched.
Though this is not your workfield: I think "IsleCreative" is not a good choice of name for a web design company at all. Associations to Isle: insular, seperate, lonesome but tropical, paradisiac and dreamy. No web in there.
Is this a design you sent to them? To print an image in 2 colors, it would have to be a duotone, or perhaps a grayscale image with a spot-color swatch applied in a page layout app. Judging by the saturation...