World Map of DisHonored - The Isles
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No, the game only takes place in Dunwall, the capital of the Isles/Gristol.

The game takes place in Dunwall only. A possible DLC might come with a new protagonist and new missions that may take place on another part of the world but Corvo's story ends with Dishonored.

This talk of sequels and DLC is interesting because we'd all like to see more of this world...but Arkane have made the game they wanted with the open ended gameplay and stealth and so on. If we saw the other islands in a sequel that was based on the same gameplay principles but with a different character, wouldn't that just devalue Corvo as a character?

Corvo isn't all that valuable as a character. He doesn't have a backstory (doesn't really need one either) and his value is only relevant to Dunwall's story. And there has been no talk of sequels, just the DLC and they are throwing ideas around. They want to do things for the game and we'll see how that will hold up after it is released.

Agreed. After all I feel that even though we play the game as Corovo, the real focus of attention behind the scenes is the Outsider. Who else has he given this power in the world of dishonored and what is his ultimate goal? These are things I could see or at least would like to see in some dlcs

The Outsider isn't a main focus as well. He doesn't have an ultimate goal, he just spreads Chaos because he can (confirmed by Harvey). But yes it will be interesting to see who the other people with the powers are and how you will deal with them in the game. Two weeks left.