Gold nanoisland films displaying localized surface plasmon resonance optical response were constructed by evaporation on glass and annealing. The surface plasmon distance sensitivity and refractive index sensitivity (RIS) for island films of different nominal thicknesses and morphologies were investigated using layer-by-layer polyelectrolyte multilayer assembly. Since the polymer forms a conformal coating on the Au islands and the glass substrate between islands, the relative sensitivity of the optical response to adsorption on and between islands was evaluated. The RIS was also determined independently using a series of solvents. An apparent discrepancy between the behavior of the RIS for wavelength shift and intensity change is resolved by considering the different physical nature of the two quantities, leading to the use of a new variable, that is, RIS (for intensity change) normalized to the surface density of islands. In the present system the surface plasmon decay length and RIS are shown to be directly correlated; both parameters increase with increasing average island size. This result implies that a higher RIS is not always beneficial for sensing; maximizing the transducer optical response requires the interrelated RIS and decay length to be optimized with respect to the dimensions of the studied analyte-receptor system. It is shown that, as a rule, transducers comprising larger islands furnish better overall sensitivity for thicker adlayers, whereas thinner adlayers produce a larger response when sensed using transducers comprising smaller islands, despite the lower RIS of the latter.