Yes on the island it's normal to have hallucinations and see things that may or may not be there. Not sure I've seen anyone in a flashback see people that weren't there.
My real point is to not judge Hurley too harshly as being crazy for this. Jack thinks that Locke is a wackjob , while Locke thinks that Jack is blocking out the true nature of the Island.
Plus have you thought to yourself that maybe Hurley's friend isn't imaginary and only he can see him? Hurley definitely doesn't think he's getting saner and looks at himself overly harshly. Hurley has some problems, for sure, but I'd say they're pretty light compared to most of his fellow castaways.
This post was edited on 3/22 at 4:04 pm