I spoilerized the details of the
Lost Highway explanation.
I forgot a lot of the movie, but I'm pretty sure there were more holes in that interpretation than just the one kuze mentions.
Spoiler:Attributing everything that doesn't fit the theory to a character's schizophrenic mind is of course convenient, but I don't think such trick was necessary in case of Mulholland Drive, which is one of the reasons for it to be better.
Another thing I loved in
Mulholland is the range of emotions it triggers (in me, at least). I laughed, I cried, I was scared, sometimes all one after another. Mind you, I am not saying that movies played on one note (like
Lost Highway's homogeneously morbid tone) are inferior. But I was in utter awe at how easily Lynch manipulated me into all those states, even before I had any idea what the hell is going on on screen.
EDIT: You know what? I think the Lynch discussion deserves a separate thread. Give me a sec. EDIT 2: Done.