Spin-Polarized Scanning Tunneling Microscopy and Spectroscopy (STM/S) were used to study electron confinement, nanomagnetism and spin-dependent electronic properties in Co, Fe and Fe-decorated Co islands on Cu(111). A new approach to alter the electron confinement, magnetic switching field and spindependent electronic properties of a single nanostructure by decorating the perimeter of the nanostructure by Fe is presented. The Fe decoration modifies the electronic structures near the edge of the Co islands. The magnetic switching field of Co islands is increased and structural relaxations are reduced. Quantitative analysis provides novel insights in the correlations between magnetism, structural relaxations and local electronic properties within and at the edges of a magnetic nanostructure. Spin resolved maps of the differential conductance on bilayer Fe islands on Cu(111) show a stripe contrast, which suggests the formation of a complex spin structure in Fe. Finally, the spindependence of the Smoluchowski effect at the edge of a Co island was established for the first time, and many specific experimental aspects of sp-STM were addressed quantitatively.