One might view this as the culmination of a thirty-hour David Lynch movie (the Twin Peaks TV series), and as such it is pretty pointless, just making explicit what we already knew or guessed from the show. I think he should've ridden the ambiguity a bit more.
Anyway, from the TV show: "Denise" is David Duchovny's cross-dressing DEA agent character. Apropos schoolgirl Audrey, who has just kissed FBI Special Agent Cooper full on the mouth:
Denise: I may be wearing a dress, but I still pull my panties on one leg at a time, if you know what I mean.
Cooper: Not really.
Hmm, perhaps you just have to watch it for yourself.