The salvage job Lynch did on Mulholland Drive remade an Innocence to Experience story (like Blue Velvet) into a doomed attempt by someone destroyed by Experience to dream-live a never-existent Innocence (like Lost Highway). Since he was retconning most of the dreamed section out of a TV pilot this rather serendipitously gives Innocence a TV feel (albeit Lynchian TV), Experience a film one.
Only trouble was a lot of the best scenes of the pilot didn't have the dreamer, "Betty," in them. Some of these help explain what's happening in the Betty ones, but others are just too hilarious (the botched hit, the director's various revenges) or terrifying (the diner, the cowboy) to drop. Hardly anything happens in Lost Highway outside the presence of Fred or his avatar. We do see Mr. Eddy and Robert Blake alone in a room in the dreamed half, but they're phoning him, and are both implausible figures. The director, nightmare-sufferer and hitman invite audience identification, by contrast - they're co-protagonists. Dreaming you're someone else is one thing, but if you dream you're several sequential, sometimes recurring persons that's strange. Lynch comes up with the best reasons he can: Diane is hiring someone to kill for her, hence her imagination might see him as her own extension; she identifies with the director in a similarly complex way that she does with "Rita" - as someone she wants to both be and be needed by, in specific ways. (And as someone whose pain she has caused and regrets.) The Winkies scene and the one where the police survey the accident site are trickier, but Lynch works hard to shoehorn in the former by convincing us that Diane's hiring of the hitman at the diner is the moment that haunts her most, in part because of her fascination with his arbitrary selection of the blue key as signal that it's been done. She just happens to see Tony Krantz right then (who gets a curiously ambiguous credit at the beginning, in the producer section but unprefixed, like a significant actor's would be). Where'd the other guy come from? Probably doesn't matter, since the walk back behind's presented in Krantz' shoes.
But the police! She's dreaming a whole TV show, which means in the dream she's the TV show itself as well as its characters. Which makes sense, though it's not how we primarily think of dreams, or physiologically dubious point-of-death semi-willed hallucinations. We think of ourselves as the person things are happening to, but that person's as authored by the remote part of us in the same way those happenings are and the locales of those happenings. Fred dreams a '50s idyll that becomes nightmare noir, so setting does reflect his state of mind, and it becomes clear that Mr. Eddy (and presumably the mystery man) stands in for aspects of self Fred's been trying to deny via projection. It's less obtrusive that he's dreaming a movie because we think of him as dreaming a person, but it's both.
So we forgive this because it makes the same sort of sense the Lost Highway shift did. I think Lynch also helps sell it by those superimpositions of Watts' face, inside which this world's contained. I don't like reducing the movie to being about Hollywood, though it's understandable that many have, but thought of this way it becomes a place in a dream as well as a real one exploiting them. (For me, the notion of its being about Hollywood feels as disgusting as hearing Chinatown described as being about Los Angeles; even in Canada there are jitterbug competitions and power-crazed tycoons.)
The person-as-place thing interests me endlessly, and I can't help regretting Lynch couldn't have done more with it - maybe all the more because he does almost everything else one can in this film. But with retconning you make the best of what little's available: the main point was saving, and putting to use, those perfect scenes, which he of course filmed assuming they were in actual fake Hollywood, not fake-fake.
I think my recent Coens dream must have got me thinking about this, on some level, hence promoting to irresistible my ever-present urge to rewatch it. I think I was "I" in that dream, but where I was was a sort of amusement park attraction designed to make you think you were dreaming. And it thought of itself as a film.
***
I probably love different things best with each viewing, but a few get me every time. That janitor's face, my God.
Above all the look Theroux gives Watts as figurative midnight strikes. I have no idea if this was intended, but it holds every wisp of pity in the world.
I actually hate contra-intentional readings on principle, but those rules seem suspended in this mad cracked-open hybrid because so many others have been. And at least it fits the point of all of it, that we pity her, horrible as we may feel she's become, and join her in her impossible wish that it had all gone otherwise. A wish that's also pity, for herself and those she's destroyed. Really there's almost too much you can read into it: for one, he does seem to see the real her. And suppose the dream-making part recoils at the prospect that he might pity her, forgive her, knowing all. She may stop here not just out of fear of undeserved or unimaginable success, but out of terror that she might deserve forgiveness and love for simply being whatever a person is. The way I forgive and love absolutely everyone after seeing or even thinking about this movie.