I saw it some time ago and I felt just like you. You can find some theories about the story on the internet, but as far as I goit it, they're all just theories and not confirmed at all by anyone who created the movie. Me, I can say that I believe the story is about the young guy with the sports car (sorry I don't know his name any more). The lesbian with her 'accident' may was created by his mind as a nightmare or something, just as the crude scene at the restaurant's backyard. Well but in the end, I'm quite as confused as you are.... -_-
Most of David Lynch's films can't really be taken as literal narratives, or at least you'll be really confused if you do. It's better (I think) to just think of characters and images in his films as gestures meant to convey some emotion or view about the world, kind of like expressionism in art. That's just how I understand it, though.
If I remember rightly in MD, the first half of the film is her dreaming, the second half is her reality. The middle area is blurred so the transition is not apparent but I believe it's when she wakes up half way through. Watch it again, it'll all make sense.
@la-li-lu-le-lo: yeah, that sounds like a comforting explanation, and I wouldn't be too surprised if it were true ;-) @type-r: well, the transition is rather clear, right? Doesn't it happen when she (don't know which one again, the fact that they all switch names doesn't help) opens the blue box? At any rate, normally I feel that a movie's narrative is too 'compressed' - i.e., they try to cram too much story into too little time. This movie is one of the few where I felt the opposite; in retrospect, it's as if I've been watching something that took 6 hours. I dunno, I'm rambling - it doesn't help that Dutch TV broadcast it from around midnight to 3AM...
I liked it. I ended up figuring out what was going on but it felt like I was really out there at first. I confirmed it on the internet. Now I can't remember anything about it... heh The blonde is in a car accident and basically imagines she's the brunette. In her coma she imagines a life where their positions are reversed. She wakes up from the coma one day and slowly starts to realize that she's actually the blonde lady and she's jealous of the brunette. She's jealous of everything she has and her success. Her motivation was to see herself as that person in her coma. Or something like that. I might have made a mistake or two...
...and exactly thats what it is all about : a destiny's joke! Remember in the start, the girl gets a price and travels to Hollyood, hoping to get famous and rich. Remember in the beginning when the parents laugh in the car? The mystery man is the destiny, who conceived a nice packed surprise for her(=aka the cube with the key): the dream ends when she discovers that everything is actually fake (no hai banda! - the fake musicians for example), on top of that she gets fucked by her own love and drowned to suicide. Thats how i saw it.
Strange....this movie was on a couple of days ago so I got to watch it again. If one could re-edit the movie you could start with Naomi Watts waking up. That's at about the 2 hour mark in the movie. The knock on the door is from her former lesbian lover who lives in the same apartment complex. That's where reality really starts in the movie. From that point you see some flashback scenes which shows the relationship between Naomi Watts and the brunette (Laura Harring). You see how Harring just toyed with Watts then threw her aside. Watts goes to the dinner party. She hears the announcement about the marriage to the director. She sees another girl that Harring has also been playing with. At that point she decides to hire a hitman and have Harring killed. She sees the key on the table which means the hit has been completed. She basically loses her mind and kills herself. From the time she wakes up to the time she kills herself you get to see all of the characters that will appear in the "dream." You don't really know if it's a dream, or if that's in her mind after her death, but whatever it is it's another world created in Watts' mind. After watching the movie from the 2 hour point to the end you can start at the beginning. I'd skip over the scene where the guy sees the homeless man in the parking lot. Too obscure. As the movie progresses you see the "perfect" world in Watts' mind. She is sweet and innocent. She's a great actress. Harring is in a car accident and dazed and relies completely on Watts. The director who marries Harring in reality? His life is shit in her fantasy. He loses his job, his wife cheats on him, etc. That was put in her mind at the dinner party when he says his wife got the poolman and he got the pool, but he was happy since he didn't like her and he got all the money. But in the fantasy his life is ruined. Harring is to be killed in the beginning, but she survives, which shows what Watts really wants. Instead of being killed Harring is dazed and randomly meets Watts. So Watts "gets" her in a sense....she needs Watts and can't leave her. That's what Watts wants in real life. I'll stop there since you probably get the gist of it. Not all of the information in the movie is perfect. Some people think the part wher they go to the theatre and see the lady singing "Crying" in Spanish is supposed to prepare the watcher for the sadness that happens next, which is where the dream ends. There are a lot of theories and no perfect answer for all of the scenes. I hope that helps...heh.
As a side point...when reading about the movie people talked a lot about the larger picture of Lynch's movies. He sometimes shows a loss of innocence or beauty, usually caused by some dark or evil force. What you see in the film is the fantasy that the victim has created since they can't deal with reality. The gap between fantasy and reality in Mulholland Drive shows just how dark Watts' world really is. Lynch tries to show the world through the victim's eyes and the mental anguish they are going through. In Twin Peaks Fire Walk with Me, Laura Palmer is being raped by her father, but she imagines it's another man so she can cope with it. It's confusing to see two different people on screen but when you think of it through her eyes it starts to make sense. Lynch is trying to express the severity of the trauma to the victim by showing how departed they are from reality as a coping technique. In the end, you aren't really supposed to understand every scene from Lynch. Some scenes are put in to express a feeling or emotion or to put the watcher in a frame of mind. It's not added to move the plot from A to B. Sometimes that can be frustrating...