An even better theory than before
The island is actually the North Pole--except, of course, with global warming effecting it. Because of this, it has broken off and floated out in some random direction.
Think about it. The polar bears are already in place. The Others/Hostiles are obviously Santa's elves. The Black Rock is Santa's sleigh; just ruined by something. The visions are the ghost of Xmas Past. The monster is some spell guarding the place.
As for Santa himself, Ben refers to him as Jacob.
Both Christian and Locke were recruited as elves because of a few things:
-So someone could watch over Santa's cabin when he is away.
-Locke would give Claire an early Xmas gift.
-So Locke could take Ben's position.
The real reason Ben needed to turn the wheel is because he was the only one who could send the island back to it's rightful place. Turning the wheel also let's the cold air out onto the rest of the island and freezes it again.