Alternative Character Interpretation: Has Freddy really escaped into the "real world" and is haunting actress Heather Langenkamp, or has Nancy lapsed into psychosis due to mental trauma suffered in previous films, and is mercifully deluded that she is merely an actress who portrayed someone going through those horrible events? (Getting temporarily better just so she can fight him off one more time before returning to her delusional safe haven.)
Or has Freddy finally managed to claw his way into the "beautiful dream" Kristen sent her into at the end of A Nightmare on Elm Street 3: Dream Warriors, where she's an actress and Freddy is just a hammy pop-culture icon?
Although being constantly upstaged by Robert Englund in burn make-up could fall a bit shy of a beautiful dream.
Arguably Fridge Brilliance: Robert Englund being the person that the public focuses on allows Nancy (as Heather) to have a career, but not be in the public eye too much.
Audience-Alienating Premise: Despite being well-received by many, the meta concept of Freddy haunting the actors in real life, as well as the Self-Insert Fic undertones, turned off a lot of people and this showed with the movie's low box office gross. In contrast, Scream, which shared similar self-aware ideals, was a roaring success, and Wes attributes this to Scream being more relatable since the main characters are horror fans instead of horror producers.
"New Nightmare" has Freddy Krueger escape into the real world and they didn't ever consider having Robert Englund fight him?
The movie hints at Freddy sort of replacing Robert Englund, with Robert sort of phasing out as Freddy shows up more, so while it is indeed a wasted opportunity, it was at least considered and rather justified in its removal.
Throughout most of the movie, Dylan's stuffed dinosaur Rex serves as his guardian and security blanket, to the point where Freddy makes multiple attempts to destroy it, and it even briefly becomes a MacGuffin. It's disappointing, then, when the movie ends and we never see Rex coming to life in the dream world and eating Freddy.
What an Idiot: Dylan. The sheer amount of danger he gets into in that film makes his continued survival frankly baffling to witness. One could infer that perhaps the plot is actively compelling him to do these type of things. Also, Heather commented that Dylan usually acts much differently, which seems to imply that his stupid actions and change in behavior are the result of what's going on with Freddy. Plus, any parent with a child his age is well aware kids do amazingly stupid things.