Lost is screwing with our heads

We missed "Lost" on Wednesday - our misbehaving ReplayTV was on the fritz. So, we caught up this evening. In the middle of the episode, Hurley starts talking to Rose about his problem (the food found in the hatch). Jack walks by, and says hi to her.

At this point, the wife and I are saying - whoaaaa - she's dead! She died last season, I thought. I went hunting around the episode guides, and found this - "White Rabbit" last year, episode 5:

Jack is nearly delirious from lack of sleep and struggles to overcome the haunting events that brought him to Australia and, subsequently, to the island. Meanwhile, Boone gets caught in a treacherous riptide trying to save a woman who went out swimming. A pregnant Claire's health takes a bad turn from lack of fluids, and a thief may have stolen the last bottles of water. Veronica Hamel guest-stars as Jack's mother, Margo. Also, Jack (Matthew Fox) flashes back at 12 years old, to find himself on the playground in an altercation with a bully, who ultimately beats him up, and later learns a life lesson from his father.

I'm certain that the woman who Boone couldn't save was Rose - and now here she is, back in the flesh, and no one remembers that she's dead? What's up with that? Did I miss something, or is this a clue that will become plain later?