This has probably been said earlier, but surely the film is not a dream but it is a film. The whole of Los Angeles is some sort of virtual film set and every person is an actor. At the beginning rita says "we're not supposed to stop here" suggesting that she is acting and in the script the car is supposed to keep driving, then because the car stopped in the wrong place some extras (the college kids) crash into the car. It appears that the role of the lead lady has to be re-cast and that's where camilla comes in. There are many other suggestions of this, for example when camilla arrives in Los angeles both her and the old lady seem amazed at their surroundings presumably because they have just been transported into the virtual film world, the old lady and man overcompensate for the fact they are on a film set by oversmiling, and camilla acts completely un-natural up until she arrives at her aunts house, also the old lady makes the comment "I'll watch out for you on the big screen" which could be taken to have a literal meaning if they were on the film at that point time.
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Your idea is obviously an interpretation and can't be discounted totally because its seems there are truly no right or wrong scenarios but it does't hold nearly as much weight as the dream theory does. If you think its all a movie how do you account for the rest of the story..what about all the blurry pictures and illusions beds as well as the coyboy telling Diane to "wake up".
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