I was reading Isaiah 11 recently, and in the second half especially something occurred to me. There's a picture of Ephraim (i.e. the northern kingdom of Israel) and Judah (i.e. the southern kingdom) working together against Edom, Moab, and the Philistines. The northern kingdom had already fallen by the time Isaiah would have first delivered this oracle. There's no sense anywhere in the rest of scripture that any unification or restoration of Israel would involve two separate kingdoms of Israel and Judah, such that there would be two nations working together, and the nations of Edom, Moab, and Philistia were pretty much non-existent by the time of Christ, even if there are people nowadays who do associate themselves ethnically with them (and I don't even know if that's true).
So it seems as if someone today interpreting this passage (while holding it to be true) cannot take it to refer to a literal teaming up of the nations of Judah and Israel against the nations of Edom, Moab, and Philistia.
Then there's a bit about God striking a river and turning it into seven channels, followed by a highway from Assyria for the return of God's people from exile. Israel had been taken to Assyria and scattered throughout the ancient near east, and other peoples had been resettled in the northern land. What was to come for Judah was exile to Babylon and then return after Persia conquered Babylon. Then you get all the stuff about various animals hanging out with each other and all eating plants.
So how much of this is literal? I've seen dispensationalists explain one of their chief interpretive principles as follows. We should try to find literal interpretations for prophecies about Israel if we can possibly do so. The goal is maximize the number of literal prophecies.
Most other interpreters with a high view of scripture will not try to maximize the number of literal prophecies but will look for evenness of interpretation. The result is that, when you have this sort of thing that seems implausible to take literally, you might also have other prophecies of the same sort about a future Israel that we shouldn't take literally, even if you can (and dispensationalists do). If prophecies about Judah and Israel as physical nations aren't necessarily about literal nations, then why should we expect other prophecies about a future Israel to be about the literal nation of Israel?
So it seems to be a dispute between (a) those whose principle is to see everything as literal unless you can't avoid the alternative and (b) those who let scripture interpret scripture by seeing kinds of prophecies and looking for evenhandedness in letting prophecies about the same subject with the same style generally be interpreted in the same way.