Confusing S&M club scene? Not really.
I've read a lot of criticisms about how the scene with the coach doesn't make sense and such, but the reality is that none of what we see is real. Jesse is asleep and dreaming while Freddy then takes over his body. The S&M club was nothing more than an element fueled by what Grady said earlier about the coach. We used to say crap about teachers all of the time, and it was no different here. Nothing in the film suggests that this is true about the coach, but rather is just an element in Jesse's dream. The coach worked late and Jesse showed up as Freddy and kills him. When Jesse awakens and Freddy no longer possesses him, he is found wandering the streets naked by the police.
Think about it. Lightning wouldn't strike inside your window and you just stand there un-phased unless it was a dream. A teenager wouldn't be admitted to a bar, much less an S&M bar, unless it was a dream. A teenager is not going to be served beer by the bartender unless it is in a dream. A teacher is not going to come to school dressed in his fetish clothes unless in a dream. Hell, a teacher couldn't even peruse such a bar in the local town to be seen and talked about by other, or he'd end up being canned, unless it is a dream. None of that was real. While Jesse was dreaming this oddball dream, Freddy controlled his body in the real world and killed Coach Schneider. What we see onscreen is what Jesse sees in his dream, which culminates in the same thing...the murder of the coach.
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I am not a fan. I just happen to enjoy movies. Fans are embarrassing.