One of the cool things is that I think the end is up for interpretation. My belief is that once Hurley and Ben became the protectors of the island, they sought to “give back” to their friends who are gone or who have died. In response to Hurley wondering how to be a leader, Ben tells Hurley something like “do what you do best — help people”. Now Hurley can make his own “rules”. So Hurley and Ben (and maybe Desmond) start thinking of a way to give their friends this happy moment after everyone dies — they concoct this situation/universe (flash-sideways) where they all can meet up again. They all then become aware while “letting go”, realizing and remembering the good times, and what was most important in their lives. This is not a specific point in linear time, but it takes place after they’ve all died. Sawyer, Kate, Claire, Richard, Miles, Lapidus all fly off and live out their lives. Rose and Bernard, Cindy the flight attendant with Zach and Emma, and a handful of other Others stay on the island. (This presumably takes place even “after” Hurley and Ben are no longer protectors of the island — maybe hundreds of years even. This is evidenced by Hurley telling Ben, “You were a great number two”.)

And it is mentioned by Christian Shephard to Jack, I’m paraphrasing: “You created all this for yourselves.” The collective ‘you’ in my little theory is Hurley, Ben, +/- Desmond as spokesmen for our Losties. And that world doesn’t exist, including Jack’s son. Eventually maybe others like Faraday, Charlotte, Ana Lucia (who isn’t ready yet, remember?), and Ben (who is close to ‘ready’), will let go. Ben may want to stay in happy-land with Alex and Rousseau a little while longer.

You’ll remember in the first episode in Season 6 when Jack is on the plane and they hit turbulence again, it’s Rose who tells Jack, “you can let go now.” At the time, we think she means let go of the terror grip of the arm rests. What if even Rose and Bernard have been involved in the construction of this flash sideways universe?

I do agree with your assertion that the purpose of the flash-sideways was to create a happy-ending, which was a little bit of a letdown seeing as it shattered many of my own theories.

I think this particular reality is all a concoction of the new Jacob, Hurley, with help from Ben and maybe a few others, as a gift to his friends to “move on” together, and not alone.