That's not true at all. They are back in time but they have knowledge of the future. There currently is one timeline but they can force another. That's what we're talking about here, creating a new timeline. Or maybe, they enter a parrallel universe. The original universe stays intact but they effectively create a new one?
Mr Awe
You're missing my point. How can they force another if they were always there back in time in the first? They always had knowledge of the future and always took actions with that in mind. It's not that they can cause different results to take place. They already used their free will to create the future we know. From our perspective, these events took place in the 70s, even if that isn't the case from their perspective.
Actually, you're missing my point.

It's a feedback loop, where the characters are the one thing (the variable) that can bring back the information from the previous loop to retry it from the beginning. So, the losties brought back the outcome of the last loop with them to 1977. They can try to make a change. From their point of view, they don't remember any previous loops but they do know how this loop worked out and can plan accordingly.
This transfer of information, of people being the variables that can change things, is what Daniel was getting at. They still have free will. In fact, I'd say they even have freer will than usual, if that's possible. They know how things will work out unless they make specific changes. You don't usually have this information. So, this additional information makes them even more powerful change agents, not less.
Mr Awe