So, with all the weirdness going on in FWWM this scene usually flies under the radar at discussion time. What exactly is going on here?

Looks like something went awry on the way to Hooker High.

 LAUGHABLE, MAN! Those aren't eight-year-olds!

I have wondered about that myself. It is quite a chaos..hehe.

Those two "school girls" look to be about 37 and 48 years old.

You can't really see who is on the bus. If no kids envolved, then.....

....an elaborate fantasy deal for some well healed customers.

All this analysis before my morning coffee. 

That's right. I remember screaming kids on the bus. So, The bus driver and two old gals are the perps taking minors across state lines for prostitution, a Federal beef. From Idaho to Montana. 

Maybe the teachers at this school doesn't have a dress code when they are on a field trip  

"watch out for my cousin.."

I think that what is happening in that scene is that the bus was carrying kids to school or from it and the bus driver decided to pick up those two ladies... Before arriving to the school he drove to a field outside Fargo, planning to party with the prostitutes, behind a tree or some bushes, somewhere close while the kids waited in the bus... Driver, kids and whores stayed there for hours until many parents began to report their kids disappearances... Maybe the FBI was nearby and they got the call...

Hey guys - This is a dream !!! The first part of Fire Walk With Me is a DREAM !!  The movie actually begins with Dale walking into Cole's office and mentioning this dream to Cole - It was Dale Cooper who investigated Teresa's murderr NOT "agent Desmond" - there IS no Agent Desmond -

 from a previous post;

http://www.twinpeaksgazette.com/community/topic.cfm?topicid=4068

Chester Desmond = Dale Cooper (the dream theory)

A controversial theory, first put forward in issue 60 of Wrapped In Plastic, holds that the entire investigation of Teresa Banks up until the appearance of the "Twin Peaks" sign, is actually a dream of Agent Cooper. In this dream, Cooper relives the investigation of Teresa Banks using the dream identity of Chester Desmond. Evidence to support this theory is found in numerous clues and oddities within the movie, as well as discrepencies between the original scripts and the final filmed version. I have not read the article myself, but will quote liberally from user Coolspringsj's comments, and add my own observations.

PROS: The way Fire Walk with Me was originally conceived, Agent Cooper was to be the investigating agent of Teresa Banks' murder. This was also the case in Dale Cooper's fictional autobiography written by Scott Frost. Due to time constraints and to avoid typecasting, however, Kyle MacLachlan was not available to play the role as originally conceived. His part was drastically cut back and Lynch devised a new character to take over the Deer Meadow investigation: Chester Desmond. The dream theory maintains that this character is actually still Cooper, but a dream-self who is reliving the unsolved case of Teresa Banks.

Several oddities support this theory. To start with, Chester Desmond (CD) and Dale Cooper (DC) share the same initials, reversed. Second, at several points during the investigation, some sort of doubling occurs: Gordon Cole has two different secretaries, there are two agents investigating the case, at Hap's diner the old man asks about "that little girl that was murdered" twice, and finally Sam repeats his comment about "we sure do need a good wake up don't we Desmond" twice. This last sentence is especially interesting in that it seems to be Cooper subconsciously trying to wake up. Following this comment, the scene noticeably starts to meander, with Rodd acting strangely and the curious woman showing up. After a lenghty silence, the dream is resumed properly when Rodd states "See I've already gone places. I'd just like to stay right here". This line, as well as Stanley's, was not in the original script. Interestingly, Desmond and Stanley never go to sleep throughout the entire investigation.

I always just assumed that the bus-driver picked up the prostitutes and maybe did something with them ON the bus - which would explain the traumatized children. 

As far as Chester Desmond not existing, I had never considered that - I guess it is possible that Dale Cooper is reliving the case in a dream (or perhaps as he is trapped in the lodge) and thinking of himself in terms of 'Agent Desmond'. Does Cooper ever mention Agent Desmond in the Twin Peaks series (I know that it was filmed before FWWM, but nevertheless...) - I think he does mention Sam Stanley in a tape to Diane (asking her to send the paper under Laura's fingernail to Albert, not Sam) - so Sam Stanley DOES exist.

 Not sure about Desmond, though. Good thought.

From a 2007 post ;

In Wrapped In Plastic #60, there is a 10 paqe essay that conclusively proves that the "deer meadow prologue" is Cooper dreaming himself as Desmond, remembering the investigation. It's very detailed and plausible. 

You know, it actually never occured to me that the "Sam" Coop is referring to when talking to Diane in the pilot might be the same Agent Sam Stanley we see in FWWM. But you're right, it must be the same character indeed ! So yeah, Sam Stanley exists. Coop never mentions Chet Desmond, though, which is a little odd.

I remember the essay from Wrapped In Plastic #60, and it always seemed a very plausible theory to me that the "Deer Meadow" part of FWWM was actually Coop's dream, and that he was the one who investigated on Teresa Banks' murder. Or maybe he remembers this not in a dream, but while being trapped in the Lodge.

I could really support the idea the dream idea except for one thing: Coop investigating Desmond's disappearance. It'd be awfully meta if he was dreaming of himself, dreaming of himself. Sure would love to read the article however.

As to the bus, I think that was just Lynch throwing in some non-sequiter weirdness.

I've never agreed with that Deer Meadow dream theory... Because of the reasons already posted (Coop dreaming about Coop investigating Chet?), but mostly because I believe that Lynch, no matter how convoluted a particular film of him is, always tells us when someone is dreaming or imagining something... It's clearly seen or at least there are many, many hints... I don't see that in this case...

The dream Coop mentions to Gordon is not about Chet, he dreamed about Jeffries appearing there or at least dreamed that something was going to happen in the FBI offices ("I'm worried about..."); he says what time is it, so it's clear to me that in his dream he saw what time it was when that 'something' was going to happen...

Besides, WHY would he dream about Deer Meadow? Are the other strange occurrences in that part of the film imagined by him in the dream or he experienced them (school bus, Lil, blue rose, indian whooping sound, message in car, Carl going places, Chalfonts trailer, Owl Ring, Jeffries,...)? If there is something supernatural going on (like in the case of his ep.2 dream), what information does he get from the dream? Or is the dream just a weird version of the real investigation?

There are many problems with this theory (other than the fact that it's frustrating to consider that Carl, the curious woman, Irene, the "goddamn hot water" lady maybe don't exist at all and what's worst, maybe Sheriff Cable never bent steel!! Coop dreamed about that!) and I guess I'll never agree with it...

In TWIN PEAKS most of the dreams the characters have mean something, they contain clues, they're not normal dreams and something (someone?) supernatural is working on them... Why Coop and Laura had the same dream? Why Laura dreamed about Annie and the Owl Ring? Why Maddy had a dream about the carpet? All those dreams had a purpose, they contained visions, information for the characters...

Cooper dreaming about Deer Meadow had no purpose at all and if it's true and Chet and the rest are not real or at least what happened to them is not real, then that's a HUGE plot device to simply justify it by saying "It's just a dream, people dream about the weirdest things".

Oh, and I disagree completely that we shouldn't solve everything in Lynch's films... DL is weird, his films are sometimes very chaotic, but the man is a genius... He doesn't put strange stuff just for the sake of it, everything in his films means something, everything is put there for a reason... We can disagree about what those things mean, but I find pointless to say we shouldn't analyze his films and that the things from them don't mean anything... I still find INLAND EMPIRE a really convoluted film (brilliant though!), but I see a pattern there, I see a plot, only I haven't quite got it 100 %. The beauty of analyzing every single aspect of a DL movie is that there's a meaning, we wouldn't discuss them here if that wasn't so...

There are too many important things in the first part of FWWM to just consider them part of a dream without enough proof...