i thought they did know and that was why jack initially didn't want to see aaron. because it was too difficult and reminded him of his half-sister.
as far as hurley saying they are all dead, i think they might be.
i think the island has some sort of "door" where you can time travel (that would explain how ben gets his money, how the ship and the islanders have no concept of time, etc.). from what i have heard, it's pretty complicated but has to do with a "glitch" in time in which the inhabitants of the island can time travel, thus not be "dead" (even if dead means living on a supposedly non-existant island).
i don't know. it answers one set of questions which leads to a whole other set of questions.