[Warning: Mulholland Drive spoilers ahead. If you haven't seen Mulholland Drive and the Lord of the Rings movies, the following won't make much sense.]
Cross Mulholland Drive with Lord of the Rings and you would get a dark, edgy movie called Mulholland Shire.
Mulholland Shire picks up where Two Towers left off, but with a shocking twist. We learn that the character "Frodo Baggins" is actually a burned-out loser named Lou Gollum whose long-term abuse of drugs has left him friendless and unemployed. He lives in a slum apartment in the bad end of Mulholland Shire. One of his few posessions is his drug pipe, which he calls his "precious."
Lou had come to the Shire expecting fame, fortune, and opportunity. But fate seemed to deliver all of the advantages to another man, Bill Sauron, who kept lucking into adventures, finding valuable antique rings and armor and becoming extremely popular. At first Lou befriended Bill, and the two had a brief but thrilling homosexual relationship. But later Bill rejected him to climb the social and political ladder in the Shire, and Lou Gollum sank into a deep depression.
The events of the first two Lord of the Rings movies have been a dream that Lou Gollum was having, in which he idealizes how his life should have turned out. In his dream, he is the imaginary Frodo Baggins, loved and trusted by Bill(bo), who recieves a precious magic ring and must go off on an adventure to save the world. Frodo is a tiny "hobbit" representing how small and powerless Lou feels at this point in his life. On the other hand, Bill Sauron has been transformed into larger characters, showing the large role he plays in Lou's life. The part of Bill Sauron that Lou hates has been transformed in the dream into the giant figure of Sauron, the dark lord responsible for all the evil in the land. But the Bill he still loves has turned into the tall Gandalf, a wise magical father-figure. (The invisibility episode near the very beginning provides an early clue that all is not what it seems -- Lou wishes he could just make Bill(bo) "disappear." And as we will see later, he already has.)
Though in the dream Lou imagines himself as the saviour-hero, the "Gollum" character manifests to remind him of the insecure, selfish, evil aspects of himself that he tries to deny. "Gollum's" babbling about the "precious" is a warped representation of Lou's drug addiction and crazy behavior. Indeed, the physical appearance of "Gollum" suggests an addict: the thin, wasted body, the hollowed, sunken face, and the crazed eyes are a giveaway.
Various bizarre images in the first 2/3 of the story suddenly make sense when understood as Lou Gollum's dream. For example, consider the scene where the Ents release floodwaters that destroy Saruman's machines and drain into deep holes in the ground. This absurd image of powerful talking trees and watery destruction would make little sense if taken literally. Instead, the giant "talking plants" represent the drugs that Lou is addicted to. They unleash a "flood" of problems, destroying the things that matter to Lou, and the image of the water draining into the ground shows Lou's life "going down the drain."
Sauron's powerful "giant magical tower" is an obvious phallic symbol in the dream, relating to Lou's prior relationship with Bill. The fact that the tower is no longer "available" to Lou/Frodo but instead guarded by giant gates and monsters shows Lou's frustration.
As the dream story goes on, Frodo looks more and more exhausted, and wonders if he can go on. This represents the crumbling of Lou's denial. The dream Frodo has been involved in many violent episodes, rationalized as combat with various "monsters," but really representing Lou's violent behavior in the real world.
At this point in Mulholland Shire, viewers will wonder how we possibly could have been taken in by the first 2/3 of the story and believed it to be real. The plot was so full of absurdities -- talking trees, wizards, Orcs, giant flaming winged demons with whips -- that it could only have been the deranged dream of a violent drug addict who has lost his hold on reality.
Frodo's quest to destroy Sauron is really about Lou Gollum's decision to take revenge on Bill Sauron by killing him. All of the obstacles that block Frodo's quest show that Lou's subconscious mind deeply regrets his decision to murder his friend, and wishes that his plan had been derailed. When Gandalf is killed by the balrog, but later miraculously appears alive again, it shows how Lou wishes that his murder, too, could be undone.
But wherever the hero Frodo goes, "Gollum" -- the real, deceitful, murderer Lou -- keeps tagging along. The evil "black riders" who constantly search for Frodo and the Ring are really the police detectives who are looking for Bill's killer. Some black riders are even mounted upon flying monsters (police helicopters).
In the end, Lou can no longer deny his situation. He must acknowledge that, far from being a hero, he is "Gollum," a twisted, evil man who killed his ex-lover in a fit of jealousy and rage, and has only his "precious" drugs left to console himself. Finally taking responsibility for his evil deed, Lou kills himself.
Though depressing, Mulholland Shire is an interesting look at the tricks our minds can play on us. As far as Lou Gollum has fallen, some part of him still desperately wants to be a hero, on a grand adventure to save the world from evil. At some level, he wants to save the world from himself.