Here's a rough outline of what I think is going on. After previous episodes, lost experience clues and the bits and pieces of spoilers for upcoming episodes, "Enter 77" kind of filled in some holes for me, and leaves me with this:

Dharma and Hanso set up the Dharma Initiative on the island. Hanso provided the financial clout and hired Widmore and Paik Industries as the subcontractors for the infrastructure buildout. It's possible Hanso knew about the island from his relative Magnus.

I think Magnus heard about an Atlantis type of place and set out to find it. He may have found it and bought/claimed it around the time he folded his shipping business. Given the current location of the Black Rock, it’s possible that he found it by crashing or being hurled onto it by a tsunami or some type of island induced event.

A certain subset of the others are the true inhabitants of the island, possibly even descendants of Magnus and his crew, or whoever was there before them. So many possibilities. It also seems that there is something "different" about these people.

A rift develops between Dharma and Hanso over something they discover about the island, it’s inhabitants or their experiments. Something that the scientists don't want getting off the island but Hanso wants to exploit. Alvar may side with the scientists on this and could be being undermined by Mittlewerk. Hence his recent apology letter on the web site.

A coup ensues, Hanso/Mittelwerk and possibly Widmore and Paik join forces with the true others (the Mittelos shell company is the byproduct) and take over most of the research facilities and their ships and sub. What's left of Dharma holds out in a few stations and perhaps in the service tunnel system.

The C4 in the Flame and the Candle video about detonating the station if the hostiles take over means there was a serious war going on. Although Dharma seemed to be into psychological head games (the Pearl station) I don’t thinking planting live charges or the consequences of not pushing the button in the Swan bear out the fact that any of this is a hoax.

Rosseau could have been part of a Dharma replacement crew who lost her team to some biological weapon or disaster (could be what the sores were on Patchy and Michaels face) and raids by the others. She may not even be aware of the remaining Dharma, or is not able to tell who's who. That's why she is so afraid of everyone. Her story about her ship losing its bearings and following the number broadcast makes sense as this may well be one purpose of the numbers broadcast. With the magnetic interference screwing up compass bearings, triangulation on the broadcast may be the only way to find the island.

One of the few things Patchy said that was true was that the others had been there a long time, longer than Dharma. The Others/Mittelos connection is why there's a mix in the Others camp. The original Others are being supplemented by Mittelos recruits who are then indoctrinated into being shiny happy book club members through drugs, sensory overload or brutality. Seems like they recruit scientists and spooks, shanghai workers and kids.

The pallet drops continue because Patchy was calling for them in his guise as Dharma. Even if Dharma has folded on the outside world, the non perishable supplies that are dropped are most likely stockpiled at some drop shipment warehouse somewhere in Micronesia. Some bush pilot gets an email, triangulates on the numbers broadcast and let's loose when he has visuals. Depending on the inventory, this system could work on autopilot for a while, although Locke’s destruction of the comm. links could put a serious crimp in the plan.

I think the list Patchy is referring to is "Jacob's list", not the lists Ethan and Klugh were compiling. I don't think Patchy knew Locke or any of them previously. It was something about the way he said it. I know you, you’re weak, and I know you too, John. But the man I know was...

The Others seem to know a great deal about all of the people on Flight 815. The list contains details about each person, and in Locke’s case it wasn't complete. Jacob's list may be something that was written before the Losties arrived. A prophesy if you will. "These people are worthy, these people are not". Perhaps Jacob hadn't foreseen the Locke walks curveball, or perhaps Ben has used the data he's compiled to create his own list and then passed it off as Jacob’s instructions.

Locke has decided or is taking on faith that whatever the others are up to is possibly world threatening and is going to unquestioningly follow station/Candle orders even if it means cutting off all chances of their escape (i.e. blowing the comm. gear and destroying the sub). He's "found God" if you will, and feels the reason the Losties were brought together and lived through the crash is to stop the others.

The dreams/flashes are karma, Dharma, God, Buddha or the devil prodding them, your choice. I don’t think they are time travel, although I do think time is skewed on the island. Perhaps slowed down as evidenced by the x-ray of the 29 year old woman with 70 year old plumbing that Richard uses to lure Juliet to the island. 

The Swan apparatus may have been governing the healing properties of the island and the Others were suffering from the change in environment (Ben’s tumor). The Losties may have been benefiting because of their close proximity. Ben may have wanted the station shut down, but did not realize that doing so would mess up communications and possibly expose the island due to abnormal magnetic readings.

This theory framework fits with Carlton Cuse's comments recently at Harvard that the show was influenced by "The Stand". Although the writers and producers have made reference too many novels throughout the series, The Stand is the only work that they’ve definitively said has influenced the show.

The Stand is a great story of good vs. evil and making your personal stand for one or the other despite the consequences. It is also the introduction of "The Walkin' Dude", Randall Flagg, who is central to many of King's stories under various pseudonyms and also the idea of the circle or wheel of Ka, which is instrumental in many of his stories.

The main characters were instructed through dreams. The dreams emanating from Mother Abigail advocated God's wishes while dreams or thoughts being broadcast by Randall Flag espoused the devil's wishes. All of the characters received both; it was up to the individual to choose between right or wrong, to make a "stand".  (distilled from Wikipedia)

Perhaps this is where Flagg ends up at the conclusion of the Stand when he opens his eyes and finds himself on his back and staring up at a tropical canopy. Familiar image to lost fans...

His words are “I come to teach you civilization “, indicating he may have reappeared at a different point in world history as the stand is set in the 1990’s. The four toed statue could be of him. He might even be Jacob... or Jacob could be the progeny of Flagg.

The message in the brainwashing video clearly says "God loves you, as he loved Jacob". Has God stopped loving Jacob, or wouldn't a more logical assumption be that he's deceased or moved on from the human realm.

Jacob may have lived on the island for a long time and now is present there in some other way. Smokey could even be a manifestation of him. Also, in The Stand Flagg often took the form of a bird or other animal to observe his enemies, this could explain the “Hurley Bird” sightings.

The producers have said that we all missed a clue in the pilot, but it wasn’t a real obvious clue, more of a stretch. Could the clue have been Jack waking up on his back, staring up at the tropical canopy just like Flagg? The powers that be sending the hounds after him, so to speak.  Perhaps they were hoping we would make the connection and realize that the story is a continuation of, or very similar to, The Stand. A battle between good and evil with divine intervention.

That's it, proceed to poke holes.