Question: Why does Freddy use Alice to gain access to new victims?
Answer: He'd killed her friends in the previous movie, remember? When he came back she'd had time to recover and make new friends.
That was Kristen, not Alice. Alice gives the answer to this question herself, while talking to Dan in the diner. She says that Kristen was the last of the children of the people who killed Freddy, and "maybe Freddy can't get to the new kids unless there's someone to bring them to him."
Question: Can anyone explain the significance of Tetsuo's transformation towards the end of the film? I've been told it supposed to symbolise something but I can't figure out what.
Answer: In effect, it should symbolize (just as the other psionics say) that humanity is not yet ready to control such power; we are mentally not 'mature' enough. And since we are mere 'children', we tend to play with that power without any real sense of responsibility, and before we know it, it goes out of control. In effect, it mirrors the lack of sense that we demonstrate in our real world, with our technical and political power.
Question: Was Arnold Epstein drafted into the army?
Answer: No.
Question: If the crocs in this movie are saltwater crocodiles, why is the lady sipping then filling her canteen with saltwater? Later when swimming with Dundee in freshwater, no crocs.
Answer: Saltwater crocodiles ("Salties") are equally at home in fresh or salt water. Sue was filling her canteen from the water in a billabong, a freshwater lake.
Answer: As Kristin was being burned to death in the boiler, she passed her ability to pull other people into her dreams to Alice. This enabled Freddy to get new victims.