Watched Mulholland Drive last night: a masterpiece, certainly Lynch's best film since Blue Velvet or Eraserhead, if not the best of his career (I've yet to see Inland Empire - will do this soon). This is a 'symphonic' film and uses repetition to convey an emotion and idea with deep complexity. It reminds me of Sibelius 5th Symphony, or the Rachmaninoff's 3rd Piano Concerto, or Beethoven's 5th Symphony. It should be seen in this context, not as a simple narrative.
This reminds me of two annoying associations of the word 'surrealism' which I dislike:
First, of dreams. Dreams can be a good root of creativity, as a way to access the normally blinded parts of the mind. Meditation is another way (a shutting off of our external senses for internal analysis). For creativity, we also need to un-dream and un-meditate; we need to take in source material, eat, and investigate and use it, digest. Both of these phases are necessary and important. The negative connotation of dreams is that they can be seen as nonsensical or easy whims, frivolous imaginings where anything counts, the psychological equivalent of 'action painting'. This should never be the case in art; the artist is a creator, not bystander while random things happen. Dreams are a tool. It can belittle surrealism to associate it with dreams in this way: 'I don't have to understand it, it doesn't have to be about anything, it's just a dream...' an ultimate insult for an artwork!
Secondly, that surrealism is based on psychology and needs 'interpretation' in a way that other art or ideas do not. We can interpret anything, any artwork, film, or piece of music, but perhaps because of surrealism's connection to dreams and Sigmund Freud and psychoanalysis, it has a unique heritage of connection to mental illnesses and therapies, which itself is irrational. In my example above, people do not tend to interpret Sibelius 5th Symphony in a psychoanalytical way in the way that people have interpreted Mulholland Drive, even though they are similar in structure and effect, and probably similar in the way they were created.
I've said before, I prefer the interpretation of surrealism as a representation of a hyper-reality, using imaginative means to convey a full gamut of emotions and sensory effects. That is all. Connections to psychoanalysis (or psycho-anything) are not relevant. Art is about feelings and ideas.