I assume most of us know the dream theory in which the first three-quarters of the film is a dream and the rest is reality (coupled with flashbacks). My theory is a small modification of that theory but nonetheless has far-reaching implications. In my theory, instead of a dream, Diane is having a drug trip/hallucination of some sort (possibly LSD) throughout most of the film. These drugs could have been the mysterious contents of the blue box, which would explain why the blue box is such a prevalent symbol throughout her trip — as a source of suspense, mystery, death, and decay; the unveiling of which jolts her back to reality.
Additionally, this theory would explain all the trippy scenes in the film, including the jitterbug contest in the beginning and the hallucinations or flashbacks at the end. According to this theory, in the beginning of the movie Diane takes acid, trips out to a hallucination of a jitterbug contest, somehow finds her way to her bed, and passes out.
After her acid trip she wakes up to the sound of her neighbor knocking. This part of the film is almost undoubtedly reality (and not part of the trip), and so her neighbor must exist. Since her neighbor exists in both reality and in her dream, we now have reason to believe that the other characters in her dream may exist in the reality of this film as well. After her neighbor leaves, however, we discover that her acid trip is not over yet. She hallucinates Camilla for a moment before regaining her hold on reality, but eventually the hallucinations win and she slips back into another trip the moment she relaxes on her couch. The reason I consider this a trip and not a flashback is because it was morning when she sat down and she had a full cup of coffee, but when she wakes up it's nighttime and she still has a full cup of coffee, indicating that she has been doing nothing but sitting there the whole time.
At the end, her final hallucinations of the old people cause her to retreat in a panic to her room where she commits suicide via a gun stored by her box of drugs — maybe a good reason to have a gun in the first place. Thus the movie boils down to two hallucinatory drug trips connected by one short excursion into reality and a short semi-lucid period immediately before her death.
Under this interpretation, neither of Diane's two trips may be an accurate portrayal of the events in reality. Both trips may merely be hallucinations based on reality, or her second trip may be a more lucid re-telling of actual events. Nonetheless, the overlapping features of the two trips may be taken to be representations of reality. For example, the fact that the hitman character was a hitman in both trips means that he was probably a hitman in the reality of the film. Camilla was Diane's lover in both trips, so that is most likely true as well. Also by this reasoning the director is in fact a director; Diane's neighbor is her neighbor; Diane is in fact an actress; the jitterbug contest happened; the bum behind Winkie's exists; and the blue box is a significant object in her reality (source of drugs). However, whether Coco is a landlord or the director's mother is not known — and what actually happened on Mulholland Drive is not known either.
Another related theory I have is that the first speaker at Club Silencio is actually Diane's consciousness, trying to tell her that she's tripping out and that what she's experiencing is not real by saying things like "it is all an illusion" — and she shakes violently in realization. Her consciousness kills Rebekah del Rio mid-song (Rebecca's singing may have been representative of Diane drifting back into the trip and away from consciousness, and Rebecca's death is representative of her consciousness finally prevailing over the hallucination). Right then is when Diane regains control of her trip, produces the blue key, allowing her to finally solve the mystery of the blue box that has plagued her from the beginning, and escapes back to reality.