New Nightmare did a lot with its meta take on the franchise, but it missed an opportunity by not having actor Robert Englund meet his screen alter ego Freddy Krueger. Freddy's Dead: The Final Nightmare from 1991 promised to be the finale of the horror franchise, which ended with Krueger being blown up by his long-lost daughter. The sequel may have been a hit but it was poorly received by critics and viewers, with many feeling it jumped the shark. When the tenth anniversary of A Nightmare On Elm Street approached in 1994, New Line when back to creator Wes Craven to see if he could give Freddy a more fitting sendoff.
Craven's originally attempted to write a sequel that tied all the previous movies together, but found little connective tissue while plotting that story. He then hit upon the notion of New Nightmare, where the creators of the franchise are stalked by a demon assuming Freddy's form, with this ancient evil having been contained by the success of the series, but unleashed when it ended. This meta concept was way ahead of its time, but while the sequel earned great reviews it only grossed modest numbers, with New Line head Boy Shaye feeling it was probably too cerebral a concept for teen viewers to engage with.
New Nightmare features Heather Langenkamp and Wes Craven playing themselves, while Robert Englund portrays the new version of Freddy - credited as playing "Himself - in addition to playing a version of Englund. While the movie slightly plays with the concept Englund may know something about The Entity, he ultimately doesn't figure into New Nightmare's story very much. He disappears from the movie after a phone call with Heather around midway through, where he's revealed to have painted a disturbing picture of the new Freddy. One missed opportunity with the story is that Englund never actually meets The Entity onscreen.
Englund's disappearance from the narrative is so abrupt some fans believe it is because The Entity possessed or took him over, but this isn't the case. There was once a scripted scene depicting Englund during a nightmare, where he's trapped in a web spun by a giant Spider-Freddy, but this was cut for budget and because it didn't fit tonally. Still, it feels like the movie could have done more with Englund as a character, and it would have been very interesting to see him and Freddy actually share a scene.
Having New Nightmare's Freddy come face to face with the actor who "created" him, be it a chase scene or just a nightmare, would have often up lots of creative possibilities, such as Englund helping Freddy crossover to the real world. For that matter, having The Entity meet his actual maker in Wes Craven also would have been cool, but it's likely Craven avoided this for a couple of reasons. New Nightmare is seen almost entirely from Heather Langenkamp's perspective to ground the "reality," so shifting to Englund suddenly may have risked breaking that spell. Also, no real-life characters actually die in New Nightmare, so having Freddy encounter Englund and attacking him would have also risked breaking the illusion. Still, it's a meeting that could have yielded rich rewards.