I'm fairly certain what Layne said is accurate. Reading the Devils' board earlier this season--and I'll look for the thread--they were saying that their pick still exists and their logo will be on the draft board, but they'll simply be skipped when their pick is up and no player name will go opposite their name and logo. The first pick of the 2nd round will still be #31 overall for recording purposes, etc.
Put simply, under your scenario, the Devils have the 10th overall pick and it is forfeited. The Isles than cannot defer the 11th overall pick, though they'd be picking the 10th player eligible for the draft.
In any event, this is likely an academic discussion. I don't see the Islanders catching and surpassing the Devils. The Islanders still haven't hit rock bottom.