I think it's based on a Japanese legend of a snow-spirit that tries to lure people to their deaths.

I SO agree with your comments about Kurosawa lacking the ability to convey dream-logic. Though my favorite director, I've also felt he comes up short in comparison to Lynch in portraying the uncannily "right" qualities of dreams. Much of this film is more like pedantic lectures.

The answer should have been:

The impression I got from that scene was that Dylan was stalking her and just pretending to accidently meet, though him running off at the end didn't reinforce that.

Yeah, that's how it struck me. In other eps I've braced myself for the predictably heartwarming moment at the end, but in this case it was really touching.

Vociferously fifthed. Been a fan of hers since Fuera de Serie.  And keeping in mind that Stonestreet is straight, he probably needed a cold shower after that scene. I know I would.