I've flown around a couple different worlds with varying settings and have observed no passive mobs spawning on any islands. Exceptions I've seen: villagers, bats, livestock in villages.

They can spawn, but they are rare. Here is a screenshot from my testing server, where I teleport mobs to me. As you can see — there are cows and wolf.

Passive mob spawn is very different from aggressive mobs spawn. They can spawn only on grass and in long periods of time. As the most terrain is air they fail to spawn (like on a Skyblock, for example). Probably I will try to tweak their spawn a bit, but actually it is not a bug.