New Nightmare............
The premise:
Freddy Krueger isn't just a story made up by Wes Craven. He is an evil spirit that has been around since time began. Wes Craven started dreaming of this evil spirit.........and wrote the story of A Nightmare on Elm Street based on his dreams. This evil spririt became intrigued in Wes's story and the character of Freddy Krueger so he was trapped inside the story......as Freddy.
When they killed Freddy Krueger off in "Freddy's Dead"......the story ended and the evil spririt was no longer trapped inside.
The evil spririt has become accustomed to our present time and space and likes the character of Freddy Krueger he has been trapped inside of. Now that he is free from the story.......he wants to enter the real world.
The evil spirit is still taking the form of Freddy Krueger because he has grown used to the form after being trapped in that character for so long. For Freddy Krueger to get into the real world he must first defeat the person who first defeated him, Nancy Thompson......who was of course played by Heather Langenkamp.
If you notice in the film......Freddy does not enter the real world untill Heather decided to play Nancy one last time. In the film, Freddy rises out of the bed.....still covered. When John Saxon calls Heather Nancy and she replies as if she is Nancy Thompson.........she is accepting the role. That is when Freddy tears through into the real world. Heather had just accepted to play Nancy allowing Freddy to enter the real world.
Wes is writing all of this down before hand......because he is dreaming it and writing a script for a new Nightmare movie based on his dreams, just like he wrote the original Nightmare on Elm St. based on his dreams. By Heather playing Nancy and battling Freddy again......Wes is creating a new Nightmare movie. This of course means that the story is no longer over and they have successfully trapped the evil spirit back inside of the Nightmare on Elm St. story....and the Freddy Krueger character within that story.