This page has seen many theories about the smoke monster...maybe too many. I will give you another one, hopefully you will like it.
The Mother (the previous protector of the island) made Jacob and MIB immortal. She told them she had made them so they never could kill each other, she never specifies how. We are made to believe, along withe MIB, that it is only Jacob that cannot kill MIB, and vice versa. But my theory is that no one can kill them. But what about Ben killing Jacob? - I will come to that later.
When the Mother discovers what MIB are doing she wipes all his Others out, knocks MIB out and fills up the well with water (but she cannot kill him, since he is immortal). She then hands her post as protector of the island over to Jacob. MIB wakes up, returns and kill the now morthal Mother with the dagger. This adds to his belief that you CAN kill the immortal with an iron dagger. He then seeks up Jacob and discovers that he now is the protector and he has accepted the rules that the Mother had - one of those is that they could not leave the island. He becomes angry and a struggle starts. Since MIB cannot be killed he is just once again struck unconscious and floats down in the Source. When coming in contact with the high EM light his body gives up but his soul cannot die. The agony he experiences down in the Source strips him from every humanity (he is not a truly good person from the start either) and his soul leaves the Source as the evil black smoke. As the smoke monster he starts to copy people that have died on the island (as well as himself) in order to walk among people and influense them to help him kill Jacob so they can leave.
Now to Jacob. Jacob is also immortal, both in the sense that he was made immortal by Mother and in his role as protector. When Ben kills him with the dagger, both he and MIB thinks he is dead. But he is not, his body is destroyed but not his soul. His soul has not been stripped from its humanity and he keeps roaming around the island in the same way as MIB (but his soul still possess its humanity and goodness so he is not a monster) telling Hurley what to do, etc. When Jack at last by himself has reached a phase when he is 100% ready to take the job as protector he also shows himself for him (,Kate and Sawyer) - in true Jacob manner moving his chess pieces without directly telling them where to go.
When the Source was uncorked all rules, both physical and abstract, that were set for the island (and probably the rest of the world) was abolished and both Jack as the protector and the smoke monster/MIB were mortal again. Subsequently Jack was hurt badly and MIB killed.
Why did not Desmond and Jack turn into new smoke monster? Although Desmond is special, he is not immortal, his life is also saved by Jack before he could die. When Jack is entering he is not immortal, he has handed over the job to Hurley. Another favourable factor for Jack was that the EM light was out when entering and ws booting up when the water filled the cave. Thus his dosage of EM radiation was lower than the dosage MIB was exposed too. He later dies from his stab wound. Even if he had died in the Source his soul would have died (or passed over to the other side if you are religious).
Bonus:
Many speculate why the smoke monster could leave a body behind (Flocke). That is truly a weakness that the writers either chose to ignore or they missed. Maybe they wanted us to see that the smoke monster really was dead by showing us a body left behind. Psychologically it is hard for humans to accept a death if there is not a body to be seen, this is a common problem for relatives to people who are lost at sea or have lost track in the forest and died without anyone finding their bodies. By exposing Flocke's body for the viewers several times we are more proned to believe the smoke monster is dead...for real.