To me it seems very clear that Peter dies in a car crash and in the instant of death (or near fatal trauma) has a cascade of half-connected dream images that seem much longer than they actually are.
This is the exact same plot as many other films, two of the more famous being "Jacob's Ladder" and the last episode of the Twilight Zone, a foreign short called "An Occurance At Owl Creek Bridge".
Come on - watch the show again. None of that could possibly be happening outside of a dream. Not even in a mad surrealist film. (Surrealists work largely with dream imagery anyway.) Watch the sequence of events with his white socks, for example. Fairly classic Freudian stuff. The sudden shift from his having arrived there unnanounced to his suddenly being left alone with the bride as her doctor. This type of unexplained shift in circumstance is exactly like a dream.
I definitely agree with the person above who says that the Kate Bush figure is someone Peter remembers and cares about. She appears as a fairly clear set of symbols.
Watched in this light, the show becomes almost realist and linear! Anyway, it does make sense. And it is one of the most gorgeous, haunting, delightful episodes of this wonderful show. It reminds me of a Bunuel film, which to me is very high praise.
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