lol you guys thought the island was them being dead, not the alternate world. Big difference.
Anyways, I didn't hate the ending and I didn't love it, but I'm satisfied with it. I'm still trying to take it all in but right now I feel like the light was an allegory for heaven and the whole struggle on the island ultimately became the Losties battle for peace in death. So yes, everything on the island happened and once they were all dead they were brought together in purgatory/the alternate world and then were able to move on.