I definitely interpret the sequence as a celebratory gathering of spirits in the afterlife.
Sue's spirit has escaped purgatory and reached a sort of heaven / white lodge equivalent - "the palace" that Visitor #1 spoke of.
( I subscribe to the 'Half-born' theory: http://xixax.com/halfborn/
I have read many theories about the film over the years and this was the first that has truly worked for me. Bravo and thank you to whoever made the website!)
I don't think it's a stretch to think that Camilla's spirit may have reached the end of her own journey through purgatory. It's really neat the way that the girl from Pomona is described as a woman who wears a blonde wig who makes men & women fall in love with her. That dialogue has always made me think of Camilla/Rita in MD, who is bisexual and wears a blonde wig at one point.)
Interestingly enough, there are some Twin Peaks parallels beyond the lumberjack, specifically with the Season 2 finale. The woman singing the Nina Simone track while the lights strobe is reminiscent of the performance of "Sycamore Trees", albeit far more celebratory.
Additionally, there's a link to the ending of FWWM, in which Laura has reached her own afterlife. (I'm so excited to see how that might be expanded upon in the revival.)