David Lynch's Mystery Man's place in the horror pantheon

The 'Mystery Man' scene from Lost Highway (embedded above) has become a YouTube classic, a bite-size précis of everything distinctive about the director's unique style and tone, that weird unnerving place between terrifying and cheesy. Here's Sean T. Collins on 'David Lynch's scariest scene'
Our hero’s an avant-jazz saxophonist; it’s possible this isn’t the oddest person he’s met this week. Nevermind that he’s had nightmares about his wife Renee, whom he can no longer satisfy sexually, in which she had this man’s face. Nevermind that this guy is saying they met at Fred and Renee’s austere house, where an unknown intruder has been breaking in to film them as they sleep and then dropping off the videotapes at their front door. Nevermind that all the music and party chatter has faded out and all we hear beneath the dialogue is the proverbial ominous whoosh. We may know we’re watching something frightening, but Fred doesn’t, not yet.
“As a matter of fact,” the Mystery Man says regarding the house, “I’m there right now.”
Blake's perverse intensity gets instantly under your skin even if you think it's silly, which it is. In the real world, dangerous people are often ridiculous and I wonder if this is why David Lynch let Robert Blake design the character and do his own makeup.
See also Collins' article about monumental horror images.