We have used direct-write electron beam lithography and a multistep masking and milling process to pattern islands with feature sizes down to 0.1 mu m out of a 200 Angstrom thick polycrystalline cobalt film. We have examined the physical structure of these islands using scanning and transmission electron microscopy and also with an atomic force microscope. Magnetic force microscopy images of islands of various sizes indicate that magnetic islands smaller than about 0.15 mu m are usually single domain. Such small particles contain only 100 grains per island or less, and the magnetocrystalline anisotropies of these grains do not completely average out. The resultant net magnetocrystalline anisotropy can sometimes overwhelm the shape anisotropy, leading to unpredictably oriented easy axes of magnetization and variations in magnetic characteristics from island to island.