Consider this setting: the Island in the mid-1500s. The Island is currently protected/guarded by somebody. To avoid confusion, and to be gender-friendly, let's name this protector Widget. As long as Widget is alive, Smokey remains trapped on the Island. Somehow, Widget dies. The Island is in need of a replacement. Eventually, Jacob becomes the new Widget, that is, the new protector/guardian of the Island. Jacob has never met Widget, but was told by somebody that Widget was from the future, who traveled back in time and became protector of the Island. Jacob is also aware that one day, the world will end in destruction (it always ends the same), hypothetically let's say the world ends in 2010. Jacob has accepted the inevitable end of the world, but at least wants to make sure that whatever world is left, that is everything up to 2010, is free from evil.
Eloise Hawking sent her own son to the island, knowing that Daniel will time travel to the past and get killed by Eloise. She knows that this is "what is supposed to happen". This is also why she worked so hard to get the Losties back to the Island (if she wasn't able to, then God help us all). In a similar fashion, Jacob spent his entire life searching for that person (widget) who will one day time travel to the past, becomes protector of the Island, and dies, and somehow leaving Jacob as the new Widget. However, the only thing Jacob knows about Widget is that Widget arrived in the Island in the future. Therefore, anybody who comes to the Island becomes a Candidate. Jacob makes a list of people who come to the Island. This is the list of Candidates. If somebody dies, they get crossed off the list, because if they are dead, they cannot possibly travel back in time.
This brings us to the present, where there are only a handful of Candidates remaining. One of them will somehow time travel to the 1500s and spend the rest of his/her life there. I realize I should only say "his" because the remaining Candidates are all male, but since this is just a crazy theory, I am opening the possibility that Kate may still be Candidate --- there's just something very fishy about her character. As boring as she's been to some fans, she just seems so strangely important in my opinion.
So to summarize my theory, the Candidate is not Jacob's replacement, rather, the Candidate is the person who Jacob replaced as protector of the Island. The question is WHO is Widget?