I believe the alternate timeline is not so much as an alt universe, but it is THE new universe in which our characters have been reincarnated as a result of their actions on the island. The human factors of the Valenzetti equation- 4 8 15 16 23 42, are the determinants that keep the current universe in "existance." I believe that if all of our candidates die, than the current universe will end, but the new one (alt) will be formed. This leaves me to believe that all of our losties will die, and I think Jack will catch on to this. He saw the alt in the Lighthouse, he knows something is up. It appears that when our losties die. I believe their on-island actions and realizations allow them to be reincarnated into who they are in the alt. Ben changed for the good, he now has a strong relationship with Alex in the New Universe. Sawyer is a cop instead of a con man, he also changed his ways. Hurley is lucky! , not cursed, etc.
Essentially, I believe that in the end, Jack + whoever is still alive in the end will sink the island, as we saw in LA X. This sinking of the island will make it so that another Jacob is not required to "hold in" the darkness. The darkness clearly isn't a big fan of water ("Just push him in the water", "If I could do that James don't you think I would"), and sinking the island is a surefire way to make sure it never comes out. Having the island sunk will allow for, and probably cause, any remaining losties and candidates to die. This will eliminate all factors of the valenzetti equation, cause the current universe to end, and it will be replaced with the "alt" in which our losties are regaining memories because they are being reincarnated into their new selves.
By the way, yes, I know the current timeline is in 2007 and the alt is 2004. But this is Lost. I'm guessing if the island is sunk and everyone dies in 2007, then this has some backwards-effect on 2004, and that is why the island is sunk in LA X.
-Deuce