Islanded microgrids with high penetration of renewable energy sources (RES) often rely on diesel generators to maintain power balance, leading to significant fuel consumption and renewable energy curtailment. To address this challenge, this study evaluates the integration of a vanadium redox flow battery (VRFB) as a long-duration energy storage (LDES) solution to support the decarbonization of islanded hybrid power systems (HPS). The analysis is based on one year of minute-resolution operational data from the Graciólica plant on Graciosa Island (Azores), combining wind, solar photovoltaic (PV), and diesel generation. A simulation framework implemented in OpenModelica was developed to assess system performance by combining a physics-based system-level VRFB model with a rule-based energy management system (EMS) that coordinates battery and diesel operation under practical operational constraints. Multiple VRFB configurations (0.5-4 MW, 4-16 hours) were evaluated through a techno-economic analysis considering battery costs, fuel prices, and monetized CO2 emissions. Results showed that increasing VRFB capacity substantially reduces diesel consumption and renewable energy curtailment, although marginal benefits diminish with longer storage durations. Under current cost assumptions, mid-sized configurations provided the most favorable techno-economic trade-off, achieving significant diesel reduction with payback periods approaching five years.