Thinking about Mulholland Drive and Inland Empire . . . .
To oversimplify somewhat, it seems clear that each of those movies is a collection of versions of "reality," some of which are more "real" than others.
The main give-away to me was that some scenes are grossly clichéd in content or style, or over- or badly acted, while others aren't -- there seems to be a range. Also, some scenes clearly seem like fantasies in which certain elements from more "real" scenes are transformed and glamorized.
I want to say each of these movies is structured like a torus, although that's more hunch than something I've confirmed. But near the centers of both movies, we encounter one scene that seems perhaps more "real," at least in some respects, than the others: the center of the donut.
In Mulholland Drive, there's a scene near the center of the movie when the young blond actress auditions and meets The Director, an unprepossessing fellow who as I dimly recall (it's been year(s) since I've seen these movies and I saw each only once) was pretty much run over by his producer and investor(s). The Director and everything else in that scene seemed not at all glamorous but almost disappointingly pedestrian. It also seemed likely that the figure of The Director was meant to connect somehow to Lynch himself, or at least to his position in some version of reality. So I figured the info in that scene re- the other characters might be more "real." And that led me to suppose that the young blond actress really is struggling, and perhaps many of the more glamorized, melodramatic, or clichéd scenes were her fantasies.
There were also several versions of a blue something-or-other -- in one or more scenes, it was a very ordinary key, or a glamorized version of a key, or a box. And this "key" was itself a key to understanding that in someone's imagination (probably the blond's), an object in some fairly pedestrian, possibly more real scenario was being transformed into a similar object in some less real scenario (possibly serving metaphorically similar functions there?).
I found Inland Empire considerably more Byzantine, although maybe I was just more tired when I saw it -- but I saw similar patterns. Again, clearly, some scenes seemed more glamorized, melodramatic, clichéd (take that, Hollywood!) And again, somewhere near the center of the movie, there's a scene that seems closer to "reality." Jeremy Irons as The Director has a conversation with the guy doing the lighting. I'd never heard Lynch's voice at the time, but my sig. other said he thought the lighting guy's sounded like Lynch's. Irons was asking the lighting guy to change something, and the lighting guy kept getting it totally backward. (I hope I don't have to point out how hilarious and significant that concept is.)
In Inland Empire, the "key" object(s) is(are) red rather than blue: someone is stabbed (I think? or wounded -- again, it's been a few years) in the stomach; while in a more pedestrian, possibly more "real" version, someone accidentally shoots himself in the stomach with ketchup; also there's a red lamp, etc. (Sorry, didn't find any stills of these red "keys" online.)
So, the point.
I am a relativist. I don't believe there is any such thing as absolute truth. There can be no description of reality that perfectly represents it, at least not without perfectly and entirely replicating it.
But that doesn't mean some descriptions can't be more accurate, or at least more useful for certain purposes, than others.
If we throw up our hands and cry, it's all lies! we may be correct, but we're giving up on life.
Our task is to distinguish as best we can which fictions are more "real" than others, at least for our purposes; or more accurately, which work better, and for which purposes. (That is, as in science, which hypotheses provide greater predictive power.)
I'm thinking this is part of what Lynch is trying to shed light on (reference intended).