This is amazing and very helpful!
Giving my characters a backstory and digging deep into their childhood and family history helped me a great deal with character development. Another thing I like to do is answer questionnaires and personality posts (like the How Similar are You to … bingo card) as if my characters were answering them. Comparing their answers and seeing how similar and different they are to each other helps me notice how diverse they are from each other.
I love the exercise about Isla, and since I actually know a girl named Isla (her name is pronounced EES-la, but it can also be pronounced differently, I think) who loves music, the internal conflict I came up with her would be that although she loves music, dancing, and performing, she’s very apprehensive about being in the spotlight because her dad was an actor who lost sight of what was important in life once he became famous, and since all this led to his downfall, Isla is afraid of ending up like him.