There seems to have been a lot of confusion about The Rules over the years and I've read a few theories here and there but here's my take.
Basically we understand that the leader or protector of the Island gets to make his/her own rules that must be followed and cannot be broken.
When Mother was the protector she made it so that Jacob and MiB could not hurt each other as a sort of failsafe to protect either of them depending whoever got the job. (I think by 'hurt' she means 'kill' because Jacob seemed to give MiB one hell of a kicking). Some could argue that by throwing MiB into The Source he 'killed' MiB but maybe Mother's rules played into the reason he became The Monster. If there were no rules about being able to kill each other, perhaps MiB wouldn't be able to live on and turn into the Monster.
Anyway. Once Jacob became protector he set his own rules which the MiB had to follow. Things like 'you cannot cross water', 'cannot directly kill the candidates', 'can only take the form of dead people', 'unable to take the form of anyone else after I am dead', 'unable to cross circles of ash' etc. This is strongly suggested when Young MiB tells Jacob 'one day you can make your own game and your own rules'. I think this is also the reason as to why MiB is plagued by visions of Young Jacob who reminds him 'You can't kill him' with a playful smile. It's almost as if Jacob is saying 'You were right, I have made my own rules and you can't break them' to rub it in which is driving the MiB crazy.
When Hurley becomes the islands protector Ben basically tells him Jacob's rules don't necessarily apply anymore and he now has the power to make his own. Ben's knowledge of this suggests to me that the rules were common knowledge among The Others. This explains why they knew to use ash to repel the Monster and to bury the dead so MiB would not have access to their body and use it as a tool. (Some could argue he didnt have access to Locke or Isabella's body, but for all we know he could have used the information he downloaded from Richard to take the form of Isabella and could have scanned Locke's body without us knowing).
Now I think Ben and Widmore, being the two power hungry rivals that they are, created their own set of rules just so they could fashion themselves after Jacob like young kids playing cops and robbers which explains why their rules were so easily broken (murdering Alex, banished leaders returning to the island so easily).
So that's that. How great would it have been to see Hurley and Ben deciding on their rules?
Hurley: Okay...so like, nothing bad can happen....ever.
Ben: Well okay, I like that but how about...Benjamin Linus can never get beaten up again....ever.
Hurley: Good call dude.
Ben: Thanks, Hugo.