It might seem from developments at the end of the episode that my theory is pretty much dead in the water, as Sun and Jin seemed to drown on the damaged submarine that was stolen from Widmore's crew, by Jack, Sawyer, Sun, Jin, Sayid, Hugo, Kate, and Lapidus, with Claire and False Locke left behind. As it turns out, False Locke had planned everything out all along, and even played alone with the betrayal he knew was coming. It was just his way of getting all of the castaways in one place, at one time, and maneuvering them into doing something stupid to kill each other (since according to some arcane "rules" he can't kill them directly).
Jack found the plastic explosives Flocke placed inside his backpack, and in vain tried to convince Sawyer they would be all right if they just left them alone. Sawyer, unfortunately, couldn't summon up that much faith, and so he did as Sayid earlier advised, pulling out both of the two connecting wires simultaneously-which seemed to work, until the attached clock started running down at hyper-speed.
Sayid informed Jack that Desmond Hume was at the bottom of a well, that Flocke wanted him dead, and that Jack needed to go find him. He then told Jack "You're the one, Jack", or something to that affect. He then grabbed the bomb and took off running with it, getting as far away from the others as he could, and had just gotten out of sight when the thing blew up.
Sayid was almost certainly dead, blown to bits, sacrificing himself to save the others. Unfortunately, the sub began taking on water, and Lapidus was the next to apparently die, when one of the doors burst open and slammed into him, after which the sub began to fill with water. Sun was penned behind some heavy object which was impossible to move, but Jin refused to leave her, and as they died, he held her hand, until their hands went limp and drifted apart.
The others made it out somehow, Jack carrying an unconscious Sawyer, while Hugo carried Kate, who was earlier shot during a gun battle with Widmore's crew.
Meanwhile, Flocke told Claire that the sub had sank, but only some of them were dead. He then stated that he was going to finish what he started. My guess is, since he can't kill them directly, he is going to try to manipulate Ben, Miles,and Richard somehow. In the meantime, lost in all this chaos was Widmore and Zoe (who was not present in this episode). Widmore earlier had locked the castaways up in the old Dharma cages, telling them it was for their own good, and then left. Sayid had then disabled the security system, enabling Flocke to kill the guards in his smoke monster form while Jack freed the rest of them from the cages, telling Kate "I'm with him" as he glanced towards the murderous, raging smoke.
As for Jack, Hugo, Sawyer, and Kate, they did indeed make it to shore alive as the sub sank. Hugo cried like a baby when he realized that Sun and Jin were indeed dead. I felt like crying along with him, because it seems to write finis to my previously stated theory as to the meaning of this little drama. To wit-Jacob and the Man In Black are actually one person, albeit one very schizophrenic person, possibly the life force of the island, or possibly someone who has absorbed the electromagnetic properties of the island somehow. One side represents the logical, cold, calculating, and even cruel aspects of the personality, the other being the primal, chaotic, emotional aspects of that personality. Jacob wants to eentually integrate the two sides into one, and this has all been a contest of wills leading up to that, probably unbeknowst to MIB. To this end, Sun and Jin will be the eventual candidates who will take on the mantle of the two conflicted halves, and therefore lead to this healing of the whole, the true self of the entity.
But, while this seems to be unlikely now, perhaps all is not yet-Lost? After all, what if, in order to take on the mantle of either of the entities, a candidate must first die. This is actually seen to be the case as pertains to Man In Blacks adoption of the form and persona of John Locke. The true John Locke had to literally die before MIB could take his form. Perhaps MIB is not aware that this is also the condition necessary for a candidate to replace Jacob. If so, everything he has done could be playing right into Jacob's hands.
A very slight clue to this might be gleaned from the sideways segments of this episode, where sideways Jack informed sideways John Locke that he was a "candidate" (hence the title) for a revolutionary new surgical procedure that may restore feeling to his legs, and might possibly enable him to walk again, all at very little risk. However, Locke was uninterested. He blames himself for the plane crash which not only paralyzed him from the waist down, but turned his beloved father Anthony Cooper (also known as the con man Sawyer) into a vegetable. My guess is when Locke eventually learns what kind of man his father really was, by way of the policeman sideways James Ford (Sawyer on the island), he might decide to take Jack's advice and learn to let go. Interestingly, right before Jack gave Locke this sage advice, he glanced around to note the entrance of sideways Jin carrying flowers into the hospital room of sideways Sun.
So if Locke is a candidate for healing, what of the real, very dead, John Locke on the island? Remember, events in sideways time always mirror, in some way, events on the island. So island Locke, by that criterion, is also a "candidate". For now, he is seemingly a candidate to take on the mantle of the Smoke. But could he also still be a candidate to replace Jacob? It bears mentioning here that in episode twelve "Everybody Loves Hugo", ghost Micheal Dawson told Hugo he needed to talk to John Locke. Since Hugo can indeed talk to the dead, he probably literally meant John Locke, not realizing he was to do this through False Locke. My earlier stated feeling is that if Hugo tried to communicate with the ghost of the real John Locke in this way, through Flocke, utilizing the entity much in the way of a medium, it might well enable John Locke to take over that form and live again, leaving MIB once more as a formless entity of black smoke, looking for yet another host. This could lead him to take the form of Sun or Jin, thus setting the stage for the final resolution when Jacob takes the opposite form. This would resolve matters due to the seeming fact that whenever one of these entities takes on the form of a dead person, they absorb the memories, personality, and emotions of that person. In the case of Sun and Jin, this would include their feelings for each other, feelings that were manipulated by Jacob in such a way as to lead them to become married, as opposed to being content to maintain a secretive love affair hidden from Sun's mobster father, whom Jacob apparently manipulated as well to approve of their marriage.
Next week, we are supposed to learn more about the relationship between Jacob and the Man In Black. I'm going on record here as guessing that Jacob's full name, before taking on the mantle of guardian of the island, was Jacob Wallace-the sole name Wallace being number 108 on the numbered list in the lighthouse. The significance of the number 108 of course is that all of the main candidates numbers total up to 108.
I'm not giving up hope yet on my theory, by any means. I look for MIB to appear in the form of Sayid, possibly to Miles, Ben, and Richard. If so, look for one of them, probably Miles, to be toast. They don't yet know about what happened on the sub, and that Sayid is dead, and they of course they already know John Locke is really MIB. It's also very possible that MIB could take advantage of Hurley's girt of talking with the dead by appearing in the form of Sun, for the purpose of manipulating him due to his obvious emotional attachment to the woman.
At any rate, if this last episode is any kind of guide, you can expect some pretty intense stuff over these final coming episodes.