So...I've seence Mulholland Dr. again for the third time around. This time, I didn't try to hard in figuring it out and piecing it all together...and then it did! So sit back, relax, and read on for my personal interpretation of the whole movie.
First things first, everyone is confused about the whole "There are 2 clues that are revealed about the movie even before the credits being to roll." If you watch closely, you'll notice 1) A jitterbug scene with people dancing and prancing happily while a picturesque, even ghostllike shot of Betty arriving to hollywood as if she was a well known movie star. This is to allude to Diane winning her jitterbug competition which inspired her to come to hollywood and become a movie star, the movie star status that she dreamed of reaching. 2) The camera opens the door, sees the red satin sheets, staggers onto the bed, and plops itself onto the pillow! This is Diane, who just came into her room and went to sleep. What follows in the next 2/3 of the movie is her dream in all its horrendous and magnificent glory.
The Dream...is it only a dream?
It was a dream full of subconscious underpinnings. You see all the characters that you see later in the movie. I'll talk about the timeline of things later, but here's the deal. Everything that Betty experiences is everything that Diane yearned for herself that she never achieved or never even had: The movie stardom and acting achievement as a lead role (her audition in the dream). In her dream, Adam has horrible things happen to him, from losing his money to his wife, is everything that Diane wanted to happen to him, especially since he stole her lover, Camilla (Rita). It shows the ill-will that Diane has against him. Gosh, there are sooo many other things that happened but I am at a brain clot right now. So I'll share what I can remember to address but email me if you have something you would like me to address. Ok, so back to my interpretation. So Adam is forced by the Hollywood powermen to cast Camilla Rhodes as the lead actress, regardless of whether she has talent or not. This displays Diane's jealousy towards Camilla (Rita), she felt as if Camilla didn't rightfully earn the lead roles she attained, that she had the people in power helping her (such as Adam himself since he's the director and all). And a lot of things happen in between that I'm forgetting due to a huge brain clot right now, but let's get to the juicy stuff. There's the big scene at El Silencio theatre in which la llorona (an allusion to a fictitious character in Spanish urban myth who kills her children and goes crying, looking for them), sings a Spanish version of Roy Orbison's "Crying" http://www.lyricsdepot.com/roy-orbison/crying.html
which explains a lot about how Diane really feels.
The Waking Moment
And then there is the blue box and it is opened and we zoom out of the pillow into Diane's bedroom. She wakes up from a loud knocking at her door, which is her neighbor, asking for her stuff back since they had just recently switched apartments. Her neighbor tells her that it's been 3 weeks and the detectives are still looking for Diane. Diane then prepares to make coffee, sees Camilla, pushes her out the door, and then goes to make coffee. She sits down on her couch and sees Camilla in the couch half naked. Camilla tells her to stop and Diane says "it's because of him (Adam) isn't it?" Then we still switch back and forth between Diane sitting at the coffee table and her scenes w/ Camilla.
So here's what I think it all means. The timeline is important and the time markers (one of the clues to look for) is the coffee cup, the ashtray and the red lamp. So here is the real timeline when the movie is pieced together. 1) Camilla and Diane's affair, Camilla tells Diane it's over, Diane masterbates cuz she misses Camilla. If you notice, when the neighbor comes, she takes the ashtray away. When Camilla is on Diane's couch, topless, the ashtray is still there. 2) The dinner/engagement party. The red lamp shows up twice in the movie, as phone calls from mobsters and also from Camilla...what a juxtaposition. 3) Diane hires a hitman to kills Camilla with the money she got from her aunt's death. He says that a blue key will be there once he is done with the deed. If you notice when the neighbor picks up her stuff, the blue key is also on the coffee table. 4) Camilla is killed. 5) Diane goes to sleep and dreams that 2/3 of the movie. Everyone she saw at the dinner party stayed with her subconssciously and appeared in her dream. 6) She wakes up to her neighbor's knocking on the door. Her neighbor takes the ashtray and you see the blue key on the table. This is the present now. Diane sits there from noon till night, flashing back to thoughts of her, now dead, lover. 7) That same night, she sees the demons creeping out of her blue box (sort of like everyone has a deep little blue box in them which they store their deepest darkest sins and secrets and demons). The demons (an embodiment of her guilt) come back to haunt her and due to the guilt and agony of it all, she kills herself.
Ok, so that was my interpretation of that. I hope this helps somewhat!