I've posted a couple of theories on her that propose that the island being underwater is not the result of Jughead, that we will see how the island is submerged later this season, and that the off-island flashes we are seeing are actually the show's epilogue.
http://theoriesonlost.blogspot.com/2010/02/how-lost-ends-expanded-theory-by.html
http://theoriesonlost.blogspot.com/2010/02/faraday-and-why-jughead-didnt-sink.html
http://theoriesonlost.blogspot.com/2010/02/what-does-kate-do-by-lostnnc.html
http://theoriesonlost.blogspot.com/2010/02/mystery-solved-jughead-didnt-sink.html
It's a lot of reading, so sorry about that. For a quick recap, her goes:
1) Jughead did not create the "alternate" off-island timeline.
2) We have not seen yet why the island is underwater but we will later this season (I am guessing that it is "moved" there).
3) Because the island actually "sank" prior to 1973 in the "alt", we will see Ben Linus off-island and he will be a fine up-standing citizen.
4) The "alt" is the end of Lost, everything else is just progress to get us to that point.
5) Faraday still has a role to play in reconciling the 2 versions of reality we are seeing.
6) In the alt, we will start to see each of the characters find "resolution" to their stories.
To add to this theory I want to discuss #s 2 and 6.
As for #6, Jack is a dad now. While his relationship has been strained, by the end of the episode he has found resolution not only with himself and the relationship he once had with his dad, but also with his son. We also saw that Dogan has a good life off the island and also has a family. So far this season, everyone we have seen has so far has had a better life than the one they had on the island.
As for #2, I have theorized that Jack is going to move the island, not only to a place in the past but also to the ocean floor. This will cause a true reset by removing the island from the equation and resulting in the ALT timeline we are seeing. Tonight we got a better idea of why Jack would want to move it that far into the past rather than just to sometime randomly prior to 2004. Jack now knows that he has been watched since he was a child. To remove the influence of the island from his life, he is going to have to move it to a period in time prior to his own childhood.
When Hugo asked Jacob why didn't he just tell him what was going on Jacob said Jack needed to see it himself because "He has something important to do."