Kristen is back (though played by a different actress), along with Kincaid and Joey, both of whom somehow survived the previous movie regardless of their general uselessness. Out of the crazy house, they are living normal lives, going to school with all their awkward late 80s classmates, the most awkward of which is Kristen's boyfriend who also happens to be the brother of Kristen's new friend Alice. Kristen has made some other friends too, so don't worry! When Freddy is resurrected there will be plenty of kids to kill in grotesque and ironic and/or fitting ways.
Freddy kills the remaining Dream Warriors very quickly and that would have been the end of things, but Kristen calls Alice into her dream, apologizes, shoots some magic ball of light at Alice and yells "I GIVE YOU MY POWER." The power to call other people into her dreams. To be killed by Freddy. Thanks Kristen, what a pal.
So like I mentioned above there is a lot of the 80s in this movie, right down to the cool but weird outsider who wears a trenchcoat and sneakers to school (he ends up fighting Freddy with karate!). The script is really bad, and there is some nonsense about Alice inheriting the abilities and mannerisms of her friends as they die.
However, the script is not bad enough to take away from the awesome direction, particularly the scene where Kristen is drugged with sleeping pills and the camera, swooping all around in one single amazing take, follows her as she runs to her bedroom, eventually falling asleep.
By now, A Nightmare of Elm Street is basically an effects film because there is absolutely nothing scary about this one, but the effects are amazing. Freddy turns one girl into a cockroach and squishes her; a far cry from the horrific death of Tina in the first movie, where she is dragged screaming and bloody across the walls and ceiling of her room in front of her horrified boyfriend, but the cockroach transformation is sufficiently gross and impressive.
Overall, not as good as the second film, but a definite close second. Starting with the next movie the series becomes an absolute joke, with Freddy on a skateboard, Super Freddy, Freddy playing video games, and more.