Maybe I wasn't paying attention, but wasn't the idea he faked his death? He was alive and well when he wrote the diary and when he faked his death he stuck it in the coffin instead of himself - by that point he'd found El Dorado, etc. hence all the clues. The sequence of events is, from memory:
1) he finds El Dorado and the coffin (not his, the 'Gold Man'), recording clues in his diary
2) he takes it to island and founds colony
3) he discovers 'curse' too late and destroys colony and fakes his death putting his diary into coffin so that no-one will ever again find island, colony, etc.
4) he dies following fall of colony in the vault
5) somehow Germans find El Dorado during WW 2 - possibly using missing page from diary or just by chance (I played game ages ago so can't quite remember if game was specific on how they found El-Dorado)
6) Germans follow clues to Island - discover 'curse' and try to harness it to their benefit in war. All goes wrong of course and the German installation is destroyed and all Germans killed or 'converted'
7) Nathan tracks down coffin after years of research using family ring he has
8) Clues lead to El-Dorado, and to German U-Boat (note first foreshadowing of later events on the Island and the creatures).
9) Clues lead to Island - and lot's and lot's and lot's of modern day 'pirates'
10) Clues lead to colony
11) Clues lead to vault and discovery of Drake's body, creature reveal, etc.
12) Escape leads to German installation, reveal of what they were up to
13) Usual half clean up ending - coffin and 'curse' sort of removed but island hopping with creatures left behind as surprise for future tourists
Personally I found the game made more sense than 95% percent of games but had the usual plot holes of such as 'Raiders' style plot. For example:
1) why put diary in Coffin at all? why not burn it? - 'cause no clues to follow!
2) how was page missing? - necessary plot device to withhold information - also I have vague memory German's had page so they could find El Dorado too.
3) wouldn't Nazi's follow up on events at installation?
4) how long do those creatures live? Food & Water I'll accept but damn, even allowing for the Germans they should all be pretty old - unless of course they breed, but game implies they are original Spanish plus some Germans.
5) how come in all these types of stories no-one ever worries about the remaining creatures, evidence, etc?
6) how the hell did a German U-Boat get into that position! I mean, lovely level, beautiful lighting, etc. but damn, I know they cover it with a quick line, but I had a lot of trouble with that U-Boat ever getting there!
Hope this helps, it's from memory and although I really like game I don't feel like booting it up to check every detail. I suspect if you simply watch the cutscenes in order so you get the story in proper order without gameplay intruding you should be able to lock down what was explained, what wasn't and what is a genuine 'plot hole'