Sawyer once served in the military. He has used the known military terms/phrases, "klicks" to describe distance in kilometers, and "sweep the perimeter." Hurley responds to each statement with confusion on to how he knows those terms. Sawyer also possesses a great amount of combat training and knowledge of martial arts. He was able to size up and subdue a number of others on the Hydra island relatively quick.
In addition, he was quick to point out that the smoke from the boat disappeared. This could just mean he is observant (but then again, Juliet is one of the most observent people on the island and she noticed nothing) or it could be that he has seen a boat sink before in some training exercise or real battle.
In Recon he says he plans to take the sub. If he was previously in the military, specifically the Navy he may have operated a sub before.
If Sawyer wasn't in the military, he may have observed people who were in the military for a previous con, requiring him to use military jargon and military knowledge. Of course, if Sawyer had been in the military then there's more to him then there would appear to be.
Sawyer claims to have dropped out of school in 9th grade, but in the episode The Brig, Locke lists "high school transcripts" as being among the items in Sawyer's file. Sawyer has a high school diploma, but wants Jack to believe that he is uneducated to go along with his con and his desire to have people not see the real Sawyer.
This was a fake diploma, that Sawyer planted. He is a con artist and used the diploma for a pre-island con.
Reason he hates the name James
As far as theories goes this one is pretty lame but here goes. Sawyer hates going by his first name James because James is also his father's name and his father was the one who murdered his mother. James like hiding from his name because every time he hears his name it reminds him of his father.
The reason he hates the name James is that he had stopped using it as soon as he adopted the Sawyer alias as anyone knowing his real name would've effectively blown his cover, which would be something that a successful conman or a career criminal would need. Also, he hid his name because it reminded him of the deaths of his parents as a result of the original Sawyer/Anthony Cooper conning him.
He feels that he is no longer James. That he stopped being that man when he started conning people. He is convinced that he can't be James anymore. Not after what he has done. He feels he has changed later on while he is with Juliet. That's why he allows her to call him James. He feels he is better with her. Less like Sawyer.
On the Island
He wants to be punished for Duckett's murder, but also doesn't want to tell anyone what he's done. He acts like a jerk to get everyone to hate him. Before the crash, he was clearly comfortable being a con man, and easy to like, as con men have to be.
The short time he spent in Room 23 affected him somehow. Since he's been back with the Losties he hasn't been as edgy and even more forgiving. He also threw the diamonds in Nikki and Paulo's grave, something that the old Sawyer wouldn't have done..
As a "Candidate"
Sawyer was chosen for the island because of his good heart and skills as con man. He will be able to lie to MIB without suspision and he will also be able to tell when MIB is not being totally honest. Jacob knows that his good heart will not let him betray his friends.
Sawyer is the ideal candidate as he a) jumped from the helicopter rather than leave the island with the Oceanic 6; b) has already worked security, protecting the island, for three years. Of the candidates, Sawyer has the most experience with island defense, and is the only one to have chosen it as a home.