it has been mentioned before, that cigarettes represent keys for unlocking hidden meaning in a scene, clues for understanding the plot. everytime a cigarette is being smoked, lit or shown it means that there's an important hidden clue that we need to pay attention to.
also, the color blue represents a clue (blue=clue) for unveiling the mystery in diane's past, hence a blue key represents solving both the mystery of the plot and diane's.

laney takes a cig from joe's shirt pocket, the same pocket that he pulls the blue key and shows it to diane, laney is dressed in blue outfit and goes inside the blue van which presumably represents a blue box, therefore laney going inside the blue van is representing the blue key going inside the blue box.

"The prostitute wearing all blue is getting into a blue van just like a key entering a box." - (vinovampire)

notice that from the viewer's perspective, blue keys and blue boxes are repeatedly placed on the upper right section of the frame:
- when joe shows the blue key to diane.
- the man in pale blue outfit on the top right of the shot smoking a cigarette with a lady friend at the lax airport scene.
- as the elderly couple leaves the airport, their limo is tailgating a blue van, and as we see their sinister grind there are multiple blue boxes on the rear windshield in the upper right section of the frame.
- diane unpacks her light blue suitcase (a blue box) placed on a bed.
- just as the magician raises his hands, with the head of the blue haired woman on the balcony (upper right) kinda looks like the blue key.
- club silencio is filled with smoke and blue lighting - the club represents a blue box.

other cigarettes appearances:
- the man smoking a cigarette across the street just as adam is about to go and smash the black limo's windshield, there's a broom next to him, when adam runs back to his car the man and the broom are gone, a guy with distinguishing red and blue colors passes by.
- the piano ashtary - a piano has multiple keys on it. it could represent a bundle of keys (or clues), it could hint for aunt ruth's bundle of keys that she picks up from the table, the same way diane's neighbour picks up *her* ashtary.
- notice that joe throw away his cigarette immediately after shooting ted in the head, the blood on ted's pointy hair looks a bit like a lit cigarette, the pointy hair might actually point to a clue, it points towards the telescope and stove tops on the right side of frame.

theory:

diane and camila were never sexually involved.
the scene in which diane and camilla are on the couch is a fantasy in diane's head while she is masterbating.
she even tries to force herself on camila, the same way she tries to force her climax, with no use, camila stops her, thus, killing the fantasy and we see diane frustrated not able to climax on her own. the fantasy in gone.
diane imagines camila in the kitchen, then replaces her with herself - more indication that diane fantasise about camila when trying to satisfy herself.

i claim that the neighbour/lamp lady was diane's former lover:
- "common diane, it's been three weeks!" - the whole scene looks like they have had shared history together.
- the piano ashtray belongs to the neighbour, we see the ashtray on the table in the camila-diane sex scene on the couch.
it is therefore possible that the scene in which diane shoves camila out the door she was in fact shoving her ex lover - the lamp lady, initially after the breakup, diane didn't even let her in the door only after three weeks.
it is possible that camila has rejected diane's love, maybe giving diane the impression that she's not into girls. yet they stayed friends while diane kept a glimpse of hope that one day camila will return her love. that's why she was devastated when she saw camila kissing the blond camila in adam's party.

it is possible that camila was diane's connection in the call-girl industry:

notice that camila calls diane (to same phone that was shown during the "the girl is missing" section in the dream) to get dressed and ready for a limo to pick her up to a party, hesitantly she goes and seated next to a random dude like a blind setup of some sort.

murder mystery?
let's assume that this is a murder mystery, camila is known actress, if she was involved in a relationship with diane, diane would be the most obvious suspect, there's no way that diane could order a hit on a known actress which happens to be her former lover without getting caught.
this means that if diane and camila were lovers it was a secret or that they weren't lovers at all. or it could even mean that camila wasn't killed. we assume that diane orders a hit, yet, this assumption is not fully based, joe was a criminal in the dream section of the film but he could have a different job in reality (P.I, detective?)

the meaning of club silencio:
when the magician raises his hands towards the end of the show, his left hand with the head of the blue haired woman look together like a blue key, the magician keeps raising his hand upwords, his fingers seemingly cutting the woman's blue haired head as the thunder strikes.


this symbolizes the blue key - (magician hand+blue haired woman) opening the blue box (club silencio), notice that the club is filled with blue lighting and smoke.
right after the magician hand motions and thunder, diane starts to shake and we see the magician making an evil face.
the interpretation is harsh yet is obvious, sexual child abuse is a difficult matter to talk about or to portray in films (club silencio).
when the magician raises his hands, his fingers hover and cut through the head of the lady on the balcony, and as the thunder strikes, diane is climaxing sexuaully.
the magician represents the evil person who sexualy abused diane when she was child. scarring her life for good.
the blue haired woman represent the woman who saw his actions but didn't do anything beside watch and be quiet.
diane uses acting as a way to mediate/compromise her dark past in her mind.
during the audition scene, the director says that it looked "forced" - another indication for child abuse, diane "spin" this experience (child abuse) in her mind as a positive one instead of a forced one.

I think you've made it clear that the color blue is some kind of sexual reference. I might add that just as a blue key fits into a small hole, there are other ways to represent the act. Such as a cigarette in an ashtray, passing through a gate, a doorway, or a narrow passageway, etc. There are many other references that you might find hard to believe.

Remember the old man that Betty meets at the airport? Tall and slender, with a bald, rounded head? Judging from his age, you would expect him to be her father, but we eventually learn that he's just a casual acquaintance. Perhaps he was a judge at the dance contest that Betty seemed to have been involved in. Dancing could be another sexual reference, but where was Betty's partner? Later in the film, we see Diane Selwyn wearing a wedding ring, but where's her husband?

Then, there's the money that they found in Rita's purse; an obvious reference to solicitation. There could be a connection between prostitution and the acting careers of Betty/Diane and Rita/Camilla. Who appeared to be the better actress, Betty or Rita? Who got the role in Adam's film? I'm sure I don't have to tell you what many actresses had to do in order to get roles in Harvey Weinstein's films.

When you talk about the events that happen at Club Silencio, I agree that the scene represents incest. However, whether or not Betty's father is truly evil and abusive is open to interpretation. In fact, this same issue (which still remains unsettled) has been debated by psychologists ever since Freud brought it up more than a hundred years ago.

Orignally trained as a neurologist, way back around 1900, Freud was treating patients (mostly females) who were diagnosed with hysteria. The term is no longer used by psychologists, but in those days it referred to a condition involving a wide variety of psychological and physical symptoms including: emotional distress, shortness of breath, fainting, insomnia, partial paralysis, amnesia and even risqué sexual behavior. In Freud's day, it was assumed that the condition had some underlying physical cause, but none could be found.

Freud believed that hysteria was the result of sexual abuse his patients had suffered during childhood. This became known as the 'seduction theory'. However, it's not clear whether his theory is really correct.

https://en.wikipedia.org/wiki/Freud%27s ... ion_theory

Firstly, Freud's patients did not tell him that they had been sexually abused. Rather, Freud inferred that they had been based on his analysis of their dreams.

https://www.youtube.com/watch?v=c2Qcmhsvcms

If you think this movie is confusing, imagine how difficult it would have been for Freud. And, by his own admission, Freud simply did not have enough scientific evidence to prove his case.

Secondly, Freud's own daughter provided evidence that contradicted his theory. Quite simply, if Anna had had violent daydreams while self stimulating during childhood, it is quite conceivable that many of Freud's patients had also had sexual fantasies. Freud eventually abandoned his seduction theory and then went on to describe the 'primal scene' and, most infamously, the 'Oedipus complex'.

Rita having sex with Betty might be an expression of a juvenile desire to have sex with your mother (the Oedipus complex). As I see it, Rita is the child, since she showed up in her birthday suit without knowing who she even was, and she depended on Betty for guidance. Moreover, the 'sex' scene we observe in Club Silencio might be a dream fantasy version of the primal scene (watching your parents have sex). Again Betty is the mother and Rita is the child. The magician is the father.

The trouble is, I can't figure out who the lady with the blue hair is supposed to be. She speaks Spanish, so perhaps she's somehow connected to Rita/Camilla. You may have noticed that she is also present at the end of the movie AFTER Diane Selwyn commits suicide. Therefore, I think Diane's suicide is also part of the dream.

good stuff :)
check out my post about Joe and and Ed office scene, it think it verifies your ego-death narrative.
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regarding the blue haired lady on the balcony, the most appealing narrative i've read here is that it's the same balcony that Lincoln was shot and killed when he was assassinated in the theatre. Rita was in a Lincoln car during the accident, later she crosses Lincoln av on her way to aunt Ruth's apartment, Lincoln was shot in the same place where Rita got hit and is bleeding from, the blue haired lady has the missing earring from the accident, the movie closes on that earring.("could be important")
it connects well with your interpretation of the "undeniable truth flashes" Rita's eyes before the collision. there are flashes and thunder while she watches the magician act.

with this assumption, the lady on the balcony represents a reminder of reality - that Rita had a life ending accident in a lincoln.