When you get to the island, you'll meet a Hermit who will tell you about the sword and explain that in order for someone to get it they have to possess the five chivalric virtues, which are valor, honor, wisdom, sympathy, and generosity. Alternatively, you can go straight to lake Lac Celavy (where the note from the notice board sends you), which is directly east from Corvo Bianco, there you'll find a little island in the middle of the lake. To get the sword, you need to complete the quest titled 'There Can Be Only One.' The quest can be picked up from a notice board, try the one in The Gran'Place in Beauclair, yet it's likely listed on several.