A quote from Mother pretty accurately sums up many LOST discussions: "Every question I answer will simply lead to another question."
Ben didn't need to survive in the 70's to create the flash sideways, in fact some characters wanted Ben to die from the gunshot. Kate decided to save Ben because he was just a kid who had not yet done everything that happened in the future. (Ironically it's insinuated that the Others saving Ben is what caused him to turn into his future self.)
The common theory is Ben was waiting to move on with Alex and Danielle Rousseau. Later on Ben may have helped Alex or Danielle remember.
I assume Desmond beating Ben caused Ben to remember because the same thing happened while they were alive.
A character entered the flash sideways after dying, they weren't in both realities at the same time.
It's stated in the show that the dead charters created the flash sideways (Christian Shepard).
Why was the island underwater?
1) The writers thought that would be an intriguing way to start the 6th season and make people watch the show.
2) Symbolism - The island is underwater and therefore out of sight. This hints at the dead characters currently not having any memory of the island.
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