Factual error: The moment Nancy's digital watch hits zero, her bedside clock rings waking her up. You cannot set an old, mechanical style alarm clock to go off with anything like that level of accuracy. (00:32:00 - 00:33:18)
Continuity mistake: After the bathtub scene, when Nancy opens the mirrored medicine cabinet and removes the bottle of Sta-Awake, her fingernails are short as usual, but in the bottle's closeup Nancy's fingernails are quite long. (00:34:10)
Continuity mistake: When Nancy leaves the kitchen to go to school, her orange backpack is empty, but when she storms away from her dad after he arrested Ron, her backpack is full.
Answer: 1. Freddy is the ghost of a child killer, he is very difficult to be rid of. He did not die at the end of this film. 2. It is possible to bring items and even people in and out of the dream world. Although it is never explained in detail how. 3. It was a dream, but as seen in the film, that's not a good thing.
MasterOfAll