Michael has definately been brainwashed - or at least that's what he wants everyone to think. Anna Maria was expendable, because she was "bad", Libby was an accident, although she has her own secret agenda. Michael wounded himself - of course to make it look like Henry did all of it. Michael's setting Henry up to be killed off by the losties. Henry was "bad", but he was also planning something - something the people in the hatches didn't like.
The 22 "others" Michael found living in tents are not the keepers of the mystery of the island. They're outcasts, they were unacceptable for use by the scientific community living in the hatches - those who are really running the island, Dharma.
The outcasts are just a collection of stranded people, forced to live in the jungle like animals - but they provide a service for those in the hatches, they kidnap other stranded people, those who are determined to be "good" - good for the experiments, especially children. Every time the outcasts deliver a "good" person to the hatches, they're rewarded with food drops - but they never know where the food drops will be, which keeps them searching all over the island, for food, but also for lost people. Henry was one of them.
What determines "good" or "bad"? High IQ? Certain talents or abilities? Violent tendencies? Addiction problems? A cooperative mindset?
The island appears to have some curative powers for the PHYSICALLY flawed - ie.: Rose, Locke, Sun. So is Dharma looking for certain mental/intellectual abilities, those without emotional/psychological flaws?
Claire sought out a psychic before her trip, Rose and Bernard went looking for a faith healer, Hurley went looking for the origin and power of the numbers, Walt in known to "make things happen", making him VERY valuable to Dharma.
Maybe Michael was sent on a mission to off Henry - for which Dharma might have promised Michael the return of Walt, but they'll never give him up. Walt's too important to them if they've learned of his abilities.
Is the Dharma experiment about psychic/mental powers, powers more easily accessed in open-minded children? Maybe Dharma is trying to develop a race of physically and mentally perfect humans - to populate the earth or to send into space or to carry on the Dharma plan?
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