Does David Lynch even know what's going on?

i do.
Perhaps he overuses the bizarre red room, i thought there was a lot of it and that the strange talking tree seemed ridiculous. I agree that that the surreal takes a lot of place... but that is the continuation of the end of season two.

It appears to me that we have a similar appreciation of the first two seasons: I thought it was marvelous until half of season two, then it went a bit off road. Still, if we take it from there then Ying Dale is trapped in the black/white/red? lodge while Yang/Bob Cooper is out in the wild. If we accept this premise then we accept the fundamentally surreal and mysterious universe of the show and therefore shouldn't be surprised to get those strange in-between world scenes that we've got so far from season 3. The fact that in the first finally Laura tells him that they'll meet again in 25 years gave me the chill. Did he really hope to reenact the show a quarter of a century later? Was it a way to keep the story open? I dunno and don't really care, I'm just so happy that he was able to make it happen and that the story continues consistently from where he left it (plus 25 years of course). Since it was left in hocus pocus land I'm not surprised to continue from there and what's really important is that the story makes sense. And I feel it does: Nicey Dale escaped, bad Dale is really really bad and Gordon's still deaf.

The rest is brewed in Lynch's style, which can annoy me as well. For instances all my movie-nerdy friends despises me because I absolutely hate Mulholland Drive and Lost Highway. That for me felt like a bucket of pseudo-intellectual porridge pored on my sad face. I pretty much loved all his other films but if you talk to a movie lover and tell him what I just wrote, you are blacklisted as an ignorant forever. It's all about the writing: it needs to tell you a story. It can be very simple like eraserhead, but you need to go from one point to another.