I'm increasingly leaning towards viewing the FST as an altered state of consciousness brought on by exposure to EM or created by MIB (or maybe that will turn out to be more or less the same thing). I've been working on memory and personal identity in my phil research recently, and it occurred to me that some of this stuff could be used to construct an interesting solution to some of the FST problems (talk about a blast from the past): i.e., what is it, why none of its time-sequencing seems to fit, etc.
Basically the idea could be something like this: while we often tend to equate our personal identities with conscious experiences and a set of memories, in fact an argument can be made for distinguishing between the individual (say, Jack), and his memories. Now it would be theoretically possible for the same individual, Jack, to have two conscious states, C1 (in the OT) and C2 (in the FST); each would be backed up by a set of memories, respectively M1 and M2, that are independent from each other. When Jack experiences events in the OT, he is in conscious state C1; but the experiences in the FST take place in conscious state C2, against the backdrop of a different set of memories, M2.
So, are they both "real"? In one sense, yes. The events that Jack lives through in both C1 and C2 are real experiences (and according to Lockian/Humean theories of experience, if I'm remembering them rightly, you only really ever have access to your own experiences anyway--we can only access reality as what-we-experience). So the events that we see on-screen in the OT and the FST are equally "real." But when we get to Jack's memories in each timeline, the story is quite different. I'd argue that Jack's memories in the OT (M1) are real, because they depict experiences he has actually lived through. But his set of memories in the FST (M2) are not; rather, they're some sort of Matrix-like construction (by MIB, perhaps) to provide Jack's C2 with a background context. Nevertheless, Jack in FST is the same individual Jack as in the OT - he just doesn't realize it. So although his experiences in the FST aren't "real," the Losties who undergo those experiences in the FST are real.
The benefits of this theory are the following:
1) It explains the possibility of bleedovers and an eventual "merger" of the timelines. Individuals in two separate timelines are separate individuals - OT Jack and FST Jack would be just as much different individuals as OT Jack and OT Sawyer. In a split-timeline scenario, bleedovers make absolutely no sense. But if we're dealing with two sets of memories / conscious experiences that belong to the same individual, then it would make perfect sense for that single individual to regain access to the other conscious state. It would be much like someone who has ammnesia suddenly getting all their memories back.
2) Increasingly the writers have been hinting that something in the FST is wrong. There can't be anything "wrong" with a separate timeline with its own causal sequence. A different universe / timeline is just that -- different. But if you have a single individual (Jack) with two distinct conscious states backed up by two distinct sets of memories, a sense of something not quite right in C2/M2 (viz., missing memories, like Jack's appendix-removal in FST) might very well follow.
3) It eliminates the need to account for the FST in terms of a timeline-split sparking a new causal sequence, which, as some have argued on here, falls apart on too many counts, since the timelines are either too similar or too different or have no possible splitting-point.
4) For me, anyway, it resonates nicely with the "you can have whatever you want" theme in Lost - Ben telling Locke that there's a box on the island that will give you whatever you want; the promises that MIB, in contrast to Jacob, keeps making. I don't think this is just supposed to be an empty promise. The FST certainly seems to be the place where each Lostie gets what he/she wanted (though sometimes, as many people have mentioned, with a nasty unexpected twist, so that most of the Losties end up feeling the lack of that "spectacular consciousness-altering love" -- a very significant phrase, from my perspective!). If there's some way MIB is able to fulfill that promise, it could very well be in some sort of Matrix-y way, by opening up a different conscious state.
5) The two characters named after political philosophers who have taken on important roles in this final season are Hume and Locke, both of whom have theories of cognition that involve being trapped inside one's own perceptions. (Hume also argues that one can never validly prove the existence of a causal sequence due to the limitations of experience, for what that's worth.)
6) It explains why the time-sequencing in the FST doesn't work. It doesn't need to. The FST is really just a jumble of detached experiences from a different conscious viewpoint, C2, embedded in a matrix of "fake" memories, M2.