Ken Suzuki’s review published on Letterboxd:
David Lynch defined this movie as "A love story in the city of dreams" in which I believe that we all have watched the movie, so I will try to explain what the dream is and what the reality is as good as possible. This might be the one and only movie I watched twice (I skipped the jump scare scene in the second watch) just because it's so confusing and I couldn't just watch it once and understand the whole thing. The dream is in the first half of the movie and reality is in the rest and they both collide when Naomi Watts (Diane in reality) wakes up from her apartment, which's completely different from her dreams.
I will explain the dream first. In the dream
Naomi Watts (Betty Elms): She arrives in Hollywood to be a movie star and her aunt is still alive. And met Rita, a mysterious brunette woman with amnesia. And the story continues with the story of a director who, in the dream, got into a lot of trouble and was such a hapless person.
In reality, Naomi Watts (Diane Selwyn): Her life is messed up, she lives in a cluttered apartment, she only got a small role but a woman she's in love with got a main role in the film and engaged to the director of the movie and she envies them. According to Sigmund Freud's dream theory, dreams usually suggest that dreams represent unconscious desires, thoughts, wish fulfillment, and motivations. And in the dream we can clearly see that it is what Diane (in reality) always wanted.
–Camilla Rhodes: in the dream she is known as "the girl", which the director doesn't feel so pleasant to have her in the main role, but he is forced by someone who sits in a chair in a mysterious empty room in which he does not exist in reality, but just a guy in Diane's dream. And as we can see, Camilla Rhodes in the dream is completely different from the real Camilla Rhodes, who in the dream is just an untalented average looking woman who doesn't deserve the role at all.
–Adam Kesher (the director): in the dream he's broke and such an unfortunate guy who's got kicked out of his own movie and got in a lot of trouble. And we can clearly see why is that since he's the one Diane Selwyn (in reality) hates the most since he stole her love and didn't pick her as the main role.
So what about the scene at Winkie's in the first half of the movie? Is it supposed to be in the dream or reality? which I believe is neither of them. The scene represents fear and anxiety which we can see from the guy from the first place again when Diane Selwyn (in reality) offers a gunner to kill Camilla Rhodes in which there's a second that she looked up to the same guy at Winkie's and we can clearly see that she was so anxious, which represents her fear of being caught being a part of Camilla's death.
So what about the key and the box? When Diane (in reality) made a deal with the gunner, he told her that he'd give her the key once he had done killing Camilla and the movie didn't show us if Camilla died or not, but we can be sure that she's dead since Diane was given a key and in the end she regrets and ends her life. In the dream there's a box too and when she opens the box she is awoken from her dreams in which the box is empty, which represents that the whole thing is just a dream and nothing is true. So the key is a key to the meeting of reality and dream and the ending of the movie.
This film is one of the most challenging films I have ever seen, so just to know that this is just my opinion and in terms of opinion about movies there is no wrong or right, but it just is.