First off, great episode. I echo Derrick's sentiments -- watch the Craven films and Freddy vs. Jason and forget the rest unless you're curious.
Second, I've seen the remake and I've got to say, it was actually pretty decent. Wasn't as good as the Craven films, but better than the other Nightmares. Haley did a great job (although I didn't really like the new make-up). I'm not going to spoil it, but I will say that there is a bit with the misunderstanding aspect you guys mentioned, but not in the way you think. I think you'll be pleased with how they handled it.