I heard a lot of people saying that they were mad at the ending because "they were dead the whole time".

This is something I've also encountered as I've poked around the fandom! I was a little surprised it was such a common misconception, as the show was pretty explicit that the island events were pre-afterlife, i.e. life. But your theory makes a lot of sense, particularly as the finale came out at a time when it wasn't necessarily easy to rewind and double-check if you missed a crucial detail.