I am convinced that Locke's dad is not his dad at all and Locke is obsessed as hell with him because he fell so hard for the con. He got conned, but is naive enough to STILL believe that the guy is his dad.
Also, I was under the impression that the "magic box" on the island was an analogy for the smoke monster, in that it makes what you want appear (Jack's dad, Kate's horse, Dave, Yimi, etc.). Now, it took the form of Locke's "dad."
Either that, or he was brought to the island a long time ago, and is possibly tied into the powerful group behind DHARMA. Whichever it is, he has not been kidnapped and held hostage.