No, I'm not suggesting it's Cooper's dream. Even in this theory, all the people are real and actual, all experiencing their own forms of purgatory.
The thing about the theory, and any of the thousand theories anyone can come up with, is that there is always as much to contradict them as there is to support any of them. But part of that is probably due to Lynch's departure in the middle of the series to go make Wild at Heart. The middle of the series is where all the least strong episodes come in (like the James affair with the married woman episode -- the series' all-time low point), and when Lynch came back towards the end of the series, he was reportedly upset at the way things had deteriorated and diverged from how he would have done things. And when he directed the final episode, I think he tried to salvage as much as he could. He heavily rewrote (on the fly) the script for the final episode from Mark Frost's original screenplay. A magazine called 'Wrapped In Plastic' published both outlines with script excerpts side by side for comparison, and while both feature Cooper entering the Lodge to rescue Annie, they are drastically different in every other way. Frost's version was silly crap, in my honest opinion. Lynch's televised version was much more consistent with the original vision and tone of the series, and is one of the finest hours of television ever aired (along with the pilot and maybe the other Lynch-directed episodes, like 13 (Maddy's death/reveal of Leland)).