No, they didn't die in the flight 815 crash and the island was not purgatory. They survived the crash and everything we ever saw happen on the island really happened to them while they were all alive. The weirdness of the island and the Dharma Initiative and Widmore and the hatches and the time jumping and Jacob and the smoke monster... all that was real. The Losties lived through that stuff (I mean aside from people we actually saw die at any point).
The sideways universe was the afterlife, or more like a waiting room for the afterlife — a purgatory. It had no specific point in time, but when people died, that's where they went. And they stayed there, blissfully unaware that they were dead (and living out imaginary lives that resolved their issues), until the people they'd cared most about in life were also dead. For the Losties, they'd all shared an incredible journey, impacted each other in powerful ways and formed lasting relationships. So none of them moved ahead until they were all there — all dead.
Since the story was following Jack's life (something not apparent to me until it all ended with the eye closing), we only saw the deaths of people who died before him. Everyone else whose deaths we didn't see, like Sawyer and Kate and Hurley... they all died at some point after Jack.
Desmond was the first to make a connection to the memories of his life, so he found the rest of them and helped them have the same recollections. Once they all did, it was time to move ahead (to heaven?). So they met up in the church, content and happy to be with their loved ones as they prepared to go to the light. I'm not sure why Ben didn't join them all. Maybe he hadn't yet redeemed himself in the afterlife? It seemed like he'd righted his wrongs, but he never did have any flash of recollection with Alex, so I guess until that were to happen, he wouldn't be ready to move on.
Anyway, I'm still digesting it all, but that's my initial take on the meaning of The End. I wished the season itself had been better, but I felt a nice sense of closure with the finale. It was emotional and sweet and it brought us back to the heart of the story: the relationships between all the characters.
Oh, for the record, I totally called (weeks ago!) Juliet as Jack's ex-wife and also that she'd ask Sawyer if he wanted to get a cup of coffee at the hospital. I have no idea if anyone else saw those things coming, but I was proud that I did :) However, I was wrong on there being any significance between Jack operating on Locke's back in the sideways universe while needing to kill Locke on-island (which I assumed would have to be by stabbing him in the back). And I was more wrong in my spec that everyone except Jack would die on the island (and that Jack would die in the sideways universe). LOL.
- Jack's death. It was a fitting end to his island story and I assume he laid down right where he'd landed after the 815 crash. The eye-closing wasn't exactly a surprising moment, but it was perfect. I guess Vincent laid with him to comfort him as he passed?
- Sawyer & Juliet. I loved them as a couple so much. It was awesome to see them together again.