Scanning tunneling microscopy analysis of the initial stages of film growth during deposition of Ag on NiAl(110) reveals facile formation of bilayer Ag(110) islands at temperatures of 130 K and above. Annealing subsequent to deposition at 130 K induces coarsening of the bilayer island distribution. The thermodynamic driving force for bilayer island formation reflects a lower relative surface energy for films of even layer thicknesses. This feature derives from quantum size effects due to electron confinement in the Ag film. The kinetics of island formation and relaxation is controlled by terrace and edge-diffusion barriers, detachment barriers, interlayer diffusion barriers, and layer-dependent adsorption and interaction energies. These key energies are determined from density-functional theory analysis and incorporated into an atomistic lattice-gas model for homogeneous island formation, where specification of the adatom hop rates is consistent with detailed balance. Model analysis via kinetic Monte Carlo simulation elucidates the role of strongly anisotropic interactions in development during deposition of elongated island growth shapes and also in facilitating upward mass transport needed for bilayer island formation. The model succeeds in recovering island densities at lower temperatures but experimental densities exceed model predictions at higher temperatures plausibly due to heterogeneous nucleation at surface defects. The same model successfully describes postdeposition coarsening of small islands grown at 130 K.