My theory is simply my own interpretation of what the island actually is if you were to explain it in it's most simple terms, and how that connects together with some of the things we witnessed in the show.
I believe that the island is the only point on earth where the living world and the spirit world meet - a literal gateway to the beyond. I believe that the light being corked up is the basis for human consciousness, or soul, whichever you believe. as mother said, there is a small piece of that light in each of us. I also think that all souls pass through the island twice, once to enter the world, and again to leave it, returning to the source. This is what i believe we witnessed in the church scene when Christian opens the doors, the characters passing through the gateway and returning to the source, on the other side of that big cork.
The reason why Michael and the other souls are trapped on the island is that they are as close to passing through the gateway as they can be, but are just unable to get through due to their own unresolved personal issues. For our characters the island acts like the moth cocoon Locke described to charlie in season 1, a place where struggle strengthens the soul until it is ready to proceed to the next level, and it cannot be helped, it must reach that place on it's own.
I think that the reason that the light allows you to manipulate time is that on the other side there is no such thing as time(as christian pointed out to jack in "the end") and so when the wheel is turned it unleashes a tiny amount of the chaos of a nonlinear dimension into our own progressive one. this temporarily allows for the island to become displaced in conventional time.
the reason the island needed protecting is that the gateway between worlds must remain open or all life on the planet would cease to exist, as it is cut off from the source (Jacob, Widmore and many others have alluded to this)
The reason that the water in the spring inside the temple had healing properties is because that water came into direct contact with the light temporarily giving it the power to unnaturally restore life to someone who should by all rights die.
The smoke monster i believe was created because nameless' body fell into the spring and died, and when his soul left his body it was unable to pass through the gateway like it should have due to mother making it so that Jacob could not kill him. his soul was then left to wonder the island without a body and his twisted and angry spirit caused him to take on the form of the smoke.
I also believe that Jacob's true form is that of white light or white smoke and that is what Locke saw in season 1. the reason i believe that is because Jacob is the island's protector and what that seems to mean is that person becomes one with the island and has control over it's power, which is white light.
The last thing is that in the purgatory universe we see that the island is under the ocean. I believe this was the writers putting in a clue right from the start that actually that world was purgatory because the losties had passed through the island gateway to the next world, kind of like in pirates of the Caribbean 3 when Davey Jones locker was under the ocean and they had to pass back through it to reach the land of the living again.
anyway there is still a lot more to think about and discuss so feel free, i want to hear more opinions!