In the jitterbug contest, Lynch sets his color theme. The background (think about that word for a moment) is a lurid, harsh magenta/purple. Lynch trained as an artist and is always deliberate with his use of color. In the 'Betty' part of the film, she is usually dressed in pink (pink is a pastel magenta). We associate that color with innocence and being vulnerable.
In our introduction to Diane, the formerly pink bathrobe has faded into a dirty greyish pale pink. Betty's innocence has become Diane's decline into the dark side. The jitterbug dancers cast very large dark shadows against the magenta/purple. We all have a 'shadow' life - our darker selves that work in tandem with our better selves to achieve our worldly ambitions.
The jitterbug contest was a real event in the youth of Aunt Ruth. But simultaneously it represents Betty's inner psyche. Betty. IS. the. young. Aunt. Ruth. when she first arrived in LA all fresh faced, innocent, naive, and vulnerable. But also accompanied by her ambitions to become a star. Those ambitions are represented/symbolized by the old couple. They stand claustrophobically on each side of Betty - hemming her in. They are with her on the flight to LA. And then we see them on the back seat of the limo, laughing maliciously. Betty and the old couple are a threesome much like the three Fates in Greek mythology. One Fate selects the thread of life, another Fate determines its length, and the third Fate cuts it at the moment of death. The Fates were not always kind. Sorrow and misery could be woven into the thread. The old couple in the limo already know Ruth/Betty's future.
I am overwhelmed with the complexity of Lynch's structure of this film. My meagre words can barely grasp some small bits of it. I salute his genius.