I don't have an answer for everything, but here's my interpretation of the whole series:
Radioactive earth magnets are fucking crazy. Or whatever it was that was under the island is crazy.
Here's what we KNOW they can do:
1. Rip planes out of the sky.
2. Do crazy shit to the weather/climate.
3. Teleport / move land masses from one place to another.
4. Initiate time travel.
Here's what we ASSUME it can do:
1. Turn bad people into smoke monsters. (or I guess you could say separate the body from the spirit/soul)
2. Make certain people live forever.
3. Summon polar bears.
Here's what I think it can do:
1. Attract things other than metal with a vicious ferocity.
A main theme throughout the entire series was, once the island chooses you, you can't escape it. Even the people that left the island ended up coming back. So here's my theory: the magnets attract greater things. Like the people themselves, their bodies, their souls, their minds, and their fates. Even after someone the island has chosen dies, their body remains, which is why the smoke monster can assume its appearance. Even after someone the island has chosen dies, their soul remains, which is why Miles can hear them, and why Hurley can see them. They're still wandering around the island, because they can't escape.
Even after they all die, they're still stuck in this purgatory that they can't escape from, because they were chosen by the island. But the H-Bomb fractured the grip that the island had over its inhabitants, which allowed Desmond, being the constant that he is, to start tapping people in the purgatory/afterlife, and in the end, finally, and completely allowing everyone to escape/leave the island.
Maybe the island is a huge metaphor for something greater in our lives, something we have trouble letting go of. Like our pasts, as all the characters were struggling with theirs, but who knows, I'll let other people think about that.
Or maybe Richard was right, and they were all just in Hell, lol.
Granted, that does leave a lot of questions unanswered, but I'm kind of okay with that. I'd rather speculate myself than be given an answer that's not that interesting, because then you're just like "...oh," and the magic is gone.