This is my first time posting a theory, but I think I'm on to something here. Regardless, there are too many undetermined variables to completely nail the finale, but I think this sheds some light on events that are yet to unfold! And sorry this is so long, but we have six seasons' worth of evidence to work with.
The Swan Incident Model:
When Desmond was referred to as the "fail-safe" in "What They Died For," I couldn't help but think back on the fail-safe switch that Desmond triggered when he and Locke chose not to push the button in the Swan station. There is clearly a narrative thread here that is worth exploring. When revisiting that event, it occurred to me that the Swan station serves as a good model for the Island timeline as a whole, and can help us figure out what will happen next. Here are some similarities worth considering.
• The Dharma Initiative constructed it to experiment with the pocket of "limitless electromagnetic energy" (EM). This energy, while powerful, is also volatile and dangerous if released (it would later bring down flight 815, and possibly wreaked other havoc after the "incident").
• The safe thing to do would be to leave the EM alone, eliminating any risk. But the DI would then would miss the opportunity to learn and/or prove new scientific things.
• The Swan has a countdown timer of 108 minutes. Within that time, the set of numbers (4, 8, 15, 16, 23 ,42) must be entered and a button must be pressed which will reset the timer. If this does not happen, the EM builds to extreme levels, can breach the station and (apparently) destroy the entire world.
• Someone, or some group, must volunteer to sacrifice their outside lives to live in the Swan and make sure the button is pushed and the EM is kept at bay. Various DI members did this, and later Desmond unwillingly became the sole resident of the Swan.
• On the Island, Jacob conducts an experiment by bringing people to the Island to prove to his brother (MiB) that people can be good. We later come to understand that "being good" means being willing to sacrifice one's life to take over the role of protector of the Island. We also understand that this is dangerous because, while MiB cannot kill Jacob directly, he may be able to convince other people (such as Richard) to do it for him. If that were to happen, MiB could leave the Island and, we are led to believe, cause the destruction of the world.
• The safe thing to do would be to keep people away from the island so only Jacob and MiB would be there, but then Jacob would miss the opportunity to prove his brother wrong and, more importantly, to find a successor. His patience can only last so long.
• Jacob is clearly running out of patience, and time. He institutes a system by which he pre-selects 360 individuals (as revealed by the names in the lighthouse) as potential candidates to replace him. This list is dwindling as they are gradually killed off, indirectly, by the MiB. We later come to understand that once Jacob and all 360 candidates are dead, the MiB is then free to leave the Island. The last remaining candidates, at least before the sub sank, focused mostly on those numbered 4, 8, 15, 16, 23 and 42.
• Someone must volunteer to sacrifice their outside life to live on the Island and make sure the MiB is kept at bay. Most recently, Jack has taken that responsibility.
These parallels then continue between the Swan scenario and the current ALT timeline. In the Swan scenario:
• When the button was not pressed, the EM breached the station, forcing Desmond to trigger the failsafe switch. Doing this destroyed the EM and the Swan (ending any studies happening there) but also saved the rest of the world from being destroyed.
• After triggering the fail-safe, Desmond's mind jumped to another place and time (specifically 1996). At first he was confused; something seemed off, but he couldn't place it. As more and more "memories" of Island, which he chalked up to being a dream, started surfacing, he decided to explore and try to change his past.
• Once he tries to change things, Eloise Hawking steps in, tells him to stop questioning things and let the universe run it's course.
• Desmond was able to return to the Island timeline after being hit in the head with a cricket bat.
• Desmond's mind-jump journey only took a short amount of time in the Island timeline, but seemed to last much longer while in his past.
Whereas in the current ALT timeline:
• People are going about their business normally, but start to notice strange things (often caused by looking in a mirror).
• As they delve deeper into strange coincidences, "memories" of the Island begin to surface.
• When Desmond tries to delve deeper into the meaning of these "memories" (by locating Penny), Eloise Hawking steps in to stop him.
• People get strong flashes of "memories" of the Island when in life-threatening situations (Charlie suffocating, Ben punched in the face) or when near someone they loved on the Island (Hurley and Libby, Daniel and Charlotte).
Given all this information, particularly the fact that Desmond's mind-jumps (including subsequent ones, as in "The Constant") only take a split-second in the Island timeline, it is my belief that the ALT scenario is a similar "mind-jump" for the rest of the characters. It seems that the point at which their minds are sent to the ALT timeline has not happened yet in the Island timeline, but is likely to occur in the finale episode.
What would cause this mind-jump? I can only assume that Desmond (the fail-safe) goes into the Source, either by choice or by force, fulfilling Jacob's original last resort plan, which I understand as being to make sure MiB can't leave the island if all the candidates are killed before one replaces him. The bad news is that we no longer need this last resort since the candidates are still alive and Jack has become the new protector. But it seems that MiB wants to trigger the fail-safe because he believes it will destroy the Island, which perhaps is sinking it. It also seems that MiB must have escape plan, perhaps a boat, by which he can stay alive in Locke's body after the Island has been destroyed.
But why is this ALT timeline necessarily a bad thing? First off, this would mean that it's not actually real. But the real downside is that, as we saw with Charlotte on the Island and Minkowski on the freighter, not being grounded in reality can cause brain hemorrhages and death. The way to get back to reality seems to be by finding one's constant in both timelines. Or, as in Desmond's first case, being hit really hard.
So, from this I can predict that in the finale Desmond will enter the Source, trigger whatever it is that causes the Island to sink, while also triggering a mind-jump in everyone to the ALT (starting with everyone on the flight 815 that doesn't crash). They'll then have to get back from the ALT (at the concert, it is implied) so that they can regain control of their on-Island consciousness and stop MiB from escaping. I can see some frantic parallel-timeline sequences, a-la Desmond in "The Constant", where it's a race against time, with nosebleeds and all, to ground themselves on the Island before their brains explode.
Further evidence that this is likely:
• Wounds from mind-jump timelines carry into the Island timeline, and vice versa, as is shown when Desmond feels the head wound from the cricket bat when he returns to the Island timeline after the Swan implosion. This could explain why Jack has a neck scar in the ALT; we haven't seen him receive that injury in the Island timeline thus far, but that's because the ALT timeline takes place alongside the finale's Island timeline. This scar appears to be of some significance.
Questions this doesn't answer:
• How exactly are they going to destroy the MiB? The only known weakness of his is water, and as far as we know that is only a weakness when he is in smoke form (it didn't bother him as Locke, but it prevents him from flying off the Island as smoke). To defeat him they'd have to get him out of Locke's body and somehow stuck over or in water.
• Would getting everyone back from the ALT timeline resurrect those who are dead in the Island timeline, such as Charlie and Locke? If so, this could explain how MiB will be forced out of Locke's body. But we have no evidence that this kind of resurrection is possible.
• How the hell does Eloise Hawking seem to know everything about all timelines, real or not? She somehow knew to keep Desmond in line both in his "Flashes Before Your Eyes" mind-jump as well as the current ALT.
• If the ALT is just a mind-jump for everyone, why bother showing the Island underwater at all?