Did you want to share your analysis Oquendo?
Actually this movie(his movies in general) was probably the main reason why I didn't enjoy Shutter Island the very FIRST time.
You are absolutely right, I had to watch this at least THREE times to make some cohesive sense out of this. Me and my sister were like, wtf??? I came to this conclusion, although I could be wrong since Lynch never explains his movies(I have seen all of his work and I kinda feel comfortable with analyzing them) - forgive me if I don't get some of the names or things right, I haven't seen this since like 2006.
MAJOR SPOILERS----
It's basically like Shutter Island, but less explanatory(which I would have hoped.)
You're right. The key scene is the BLUE BOX, but also the last scene where Rita and director announce their engagement...
You see, everyone in the film basically played a "role" in her fantasy/dream. The opening shot is shows a POV of the camera falling onto pillow - Betty is going to sleep to wake up in fantasy land - HOLLYWOOD, where she is a budding actress, and her parents are happy for her. The following events are basically her depressing life "idealized" with the people she knows or saw during the dinner scene.
In "real life," Rita is her lesbian lover, but at the end, we find out she has been cheating on Betty with the director and they are getting married. At the dinner scene Betty becomes extremely hysterical and photographs everyone 'subconsciously' in her mind for later. Betty gets so jealous, she has Rita killed by a hitman. The blue key means that the job is done. Betty feels remorse and her parents(representing her hopes and dreams) torment her at the end until suicide.
Going back to the characters, the situations they all get themselves in are basically parallel to the things in Betty's life as well as the things she wants to happen.
For example, Rita escapes death in the beginning representing what Betty really wanted to happen.
The director gets fired for his movie(which if I remember Betty ends up being cast) and also we learn that his wife is cheating on him(like Rita was cheating on her).
The hitman is clumsy, incompetant, and stupid - Betty wishes he was these ^things^ in her dream/fantasy so he would not be able to kill Rita.
The cowboy was basically some guy that walked by in Betty's view during her hysteria scene at the dinner table - think of it like when you dream about someone you don't know, but you saw them at McDonald's or something for a split second and your mind just remembered their face and put that person in a role in your dream...
Okay if your head isn't exploding by now, your doing great...I won't say anything else because that's the whole fun of it all!
This movie is quite complex and very original and really inspiring for me. The key to this movie is also the editing. Lynch is very meticulous with how everything is place next to one another and how our minds put them together analytically. David Lynch is clearly ahead of everyone back in 2001(not long ago) and is really pushing the language of movies and how it can tell stories.
My only problem with him is that he purposely makes his films "weird" for the sake of being "weird" not to mention he is over-the-top at times. I'm suprised you weren't offended by the lesbian scene(which I have to admit was quite "well done" lol

) because my sister feels that Lynch is a huge misogynist, even though she really enjoys his movies.
Anyways, happy hunting!
PS If you check out Lost Highway, it's very much a companion piece to this movie which may help getting to know Lynch better. INLAND EMPIRE is "meh," but still fun for SAT night! I think this and Blue Velvet(which is not as abstract) are his best.