First, I must issue the following warning. If you have not seen all of Twin Peaks; all 29 episodes and both movies, STOP READING RIGHT NOW or I will give away the ending. You’ve been warned.
One of the things I love about David Lynch is that all his work is open to multiple interpretations and multiple discussions. For Twin Peaks, I hold two mutually exclusive interpretations. At various times I lean more toward one or the other.
The Fight Club Theory: Dale is on control. He always has been. He IS “The Magician” who “Longs to see.” Mike and Bob are alternate aspects of his own personality. Dale sent Bob on ahead of him in the vessel of Leland for the purpose of preparing Twin Peaks for his arrival. We see him use his “Mike” side, but while he pretends that he is trying to protect the town from Bob, he is really building their trust gradually as he plans to use his “Bob” side to take over the whole town; to corrupt them and bring them over to the side of his evil. Other, larger, towns will follow. That has been the plan all along.
The Lord of the Rings Theory: Dale is being tempted by Bob; by power. At the point of the story where episode 29 leaves off, the entire town clings on his every word and obeys his every command (no matter how strange). Bob and the other… things… in the Black Lodge had to pull some elaborate trickery to get Dale to allow Bob into himself, but it will be worth it; somebody with that much power and influence COULD turn that whole town. And I believe he will. The Giant warned him to stay away from what’s-her-name… you know, the character played by Heather Grahm. Why? Weakened by his passion and his desire to protect her, he is more receptive to Bob AND because all he needs is a queen. The part of the story that David Lynch never got to tell was this: Dale and his queen (Heather Grahm) begin to take over the town, using their influence to turn the town to sin, evil, and murder. And with Ben Horn in a coma, the town is theirs (both spiritually and financially) for the taking. The war between heaven and hell is being fought within Dale. And at this point, hell is winning. “Good Dale” is trapped in the Black Lodge, with no vessel to help him out (the only possibility is Major Briggs). Meanwhile “Bad Dale,” is reveling in his passions and his powers. Eventually, “Good Dale” will win out, but only after Bob has some fun…
Of course, if I were to present either of my theories to David Lynch, I'm sure he would say, No, you're way off. That's not what I meant at all. And then he would walk away.