Some current thoughts...
Hurley isn't talking to dead people...he's talking to Jacob, acting as dead people. Once Jacob was killed, they flipped: Smokey is now got his human self back as Locke and can't switch anymore, and Jacob is now ethereal and can take on the appearance of the dead. He manipulated Richard again, using his wife, just like Smokey tried to do all those years before. There's a reason it was in the same episode
His wife telling them they'd all end up in Hell was the sure giveaway that it was Jacob - that's the same speil he used before.
Jacob's willingness to lie was pretty evident last night as well. When he attacks Richard, he demands to know who he is and acts as though he doesn't know why he's there...then later tells Richard (and we know) that he brought the ship to the island. I can guarantee that Richard's name is on the wheel or cave ceiling. He also told Richard that the island was keeping Smokey trapped, yet it appears that it's Jacob that's doing it, not the island. Or perhaps more importantly, the island was just the cork in his example, and the bottle was Jacob.
If we assume that both Jacob and Smokey are lying to everyone at least 90% of the time (hence the whole Hell thing with Richard last night) to avoid revealing their true motivations, how do we glean any truth? From their conversations with each other. We can probably assume they have no real need to lie to each other.
That does tell us that Smokey really does want off the island, and has for at least the last 150 years. We also know that prior to that, there is some sort of ongoing 'game' (for lack of a better word), since they use the black and white stones to show who's ahead at any one point (and there was a white and black one on the balance in the cave, obviously to indicate agreement that they were in balance at the time). Also indicating the game like situation is the two separate 'offices', with the cave serving as Smokey's and the lighthouse as Jacob's. They have been tasked with this ongoing objective - Jacob selects candidates to prove humanity is good, Smokey sets up traps and tricks to prove they are all corruptible.
What went wrong with their ongoing game? Let's go back to this idea that only one of them can be truly 'human' at one time. Maybe the crazy mom created that situation, maybe they are a split personality, and only one personality can be in control of the humanity at a time. And maybe they used to share it - i get to be human for awhile, you get to be human for awhile. But maybe at some point Jacob decided he was going to be the human. He gets to leave the island, he gets all the benefits of a truly physical self. He screws Smokey, forcing him to remain ethereal. In that state, Smokey can never again leave the island.
Remember that while Jacob tells Smokey he'll never let him leave the island as long as Jacob is alive, he doesn't say why. No comment about Smokey being evil, or hurting the world, or maybe...just because Jacob knows he'll never come back, leaving Jacob locked in the state he has smokey in now. Personally, I think that at the end we're going to feel for old smokey and hate Jacob.
BTW, other people may have already had this revelation, but it hit me last night that the Others didn't get their name from Dharma or any other group on the island - they got it from Jacob. Jacob can't interact with the candidates in his living form (probably one of the rules, like you can't kill the candidates directly), and there appears to be other things he can't do (like protecting the candidates from various threats)...therefore, he needs 'others' to do these things for him. Therefore, he refered to his group of followers as the 'Others', and it stuck.