So my theory is that Stranger Things is all a story made up by Jim Hopper for Sarah. Here’s why:
1. The blue rubber band is a representation of his daughter throughout the series. We see both Jim and El wearing it consistently. El is a representation of Sarah. El having superpowers is a way for Sarah to feel like the main character of the story. Jim is with El on her journey just as he is with her on her journey through cancer treatments.
2. The Demogorgon, demodogs, demobats, and the mind flayer are all representations of her cancer. We hear consistently that everything is connected. One has an effect on the other.
3. El loses her powers. Sarah loses her hair and becomes worse over time after an infection. Just as El was infected by the mind flayer.
4. In season 3 episode 8 - Battle of Starcourt - Jim specifically says to El “this things after you. It’s not after me. I need you safe.” This is Jim telling Sarah the cancer is after her and she shouldn’t worry about him but work on getting better.
5. All of the tests we see El put through in the Hawkins lab this could be a way for Jim to tell her the tests being run at the hospital for her cancer are ways to help her with her super power.
6. When Jim goes missing in Russia this is a representation of Jim having a hard time with her sickness and ends up not being there for her when she needed him most. Much like El needing him while in California.
7. Each time they close a gate the monsters come back. This is a way to describe how every time they think they’ve cured Sarah the cancer resurfaces stronger than before and that’s when things seem to be hopeless for them.
All in all this is a way for Jim to put Sarah’s fears at ease during her stay in the hospital. All of the additional characters could be patients and staff at the hospital helping out with the stories details as well.
I think the characters we’ve lost so far have been patients that Sarah knows and didn’t make it. The memories that help save them each season are stories they tell Sarah about and she carries them with her through her time in the hospital.
I think Dr. Brenner, who could possibly be her actual doctor, is seen as a scary man to Sarah at first so Jim uses that to describe him as he is portrayed throughout the series.
I think this could possibly be the big reveal at the end of the series for Stranger Things. Again this is only a theory but it works. There’s so much representation of Sarah and her sickness that I think it works.