Well, FallingRain22, You missed on important thing about yin-yang symbol. It has dots in opossite colors(white in black part and vice versa), what mean some godness in evil and some evil in goodness. But in Sunsets cutie mart we have two SEPARATE parts. It could refer to godness and evil but definitely not as balance between them(which would be ridiculus there's no such think like balance between god and evil. Evil is just lack of good. Like cold is lack of heat and darkness is lack of light - it doesn't exist from itself it's just our way to describe lack of something), rather in such way as transition between goodness and evilness. To be more exactly conversion from being bad to being good, its prophecy of her conversion/reformation.

And also it could refer to double-meaning element. Well we already have such element. Because the Element of Magic mean at the same time "Element of Friendship"(what's quite logical in world where friendship is magic), therefore Sunset has Seventh Element - Element of Forgiveness/Conversion(unfortunetely English term doesn't fully fit the meaning which I'm thinking about, because it doesn't fully reflect polish world "Nawrócenie", orginally used in this theory, perhaps "Redemption" is here better option I'm not sure, but i definitely wouldn't use term "Reformation"(because its related to protestants)). Why such double meaning? Because conversion and forgiveness are like two sides of the same coin. After conversion there come also forgiveness, and in some cases forgiveness can cause conversion/redemption. Sunset's story shows it very well. This is the reason i think she is this "Seventh Element", Element of Forgiveness/Conversion(Redemption?). But this element is very unique, and as the only can work alone and other elements don't need it to work. And is double coloured(as the only on) - it's exactly a crystal version of her cutie mark(i mean this is double-color Element)

And well i also think, that she became alicorn when she transformed to Daydream Shimmer during Friendship Games(what was announcet in "My past is not Today"), so she doesn't "restore balance between races". But of course it's just a theory(but I must admit that this part about Sunset being alicorn i see as very propable).

You theory also seem to be quite good, despite this small inaccuracy with yin-yang symbol(but well in symbols details are important, so this suggest my theory can be truer).