Michelle,
The beginning of your dream could suggest something gone bankrupt {Blockbuster video}. But that would require an in-depth examination of your perception of Blockbuster video {the store chain} especially the unconscious perceptions. But it could very well apply to the dream. Let's see what the rest of the dream offers up.

Your neighbor Katie as a real entity in some respect has relevance to the dream, that is the actual waking relationship you have with her having some associations to what the dream is trying to address. But I sense Katie is more a part of you, a representation of similar/shared qualities or traits the two of you share. In some important aspects she is you. The fact you both have sons who are friends not only speaks to a reality in your waking life but also to the shared qualities with Katie that go to deeper depths of your unconscious. Dreams do not often speak to the obvious {the actual waking relationship with Katie as a neighbor and the two sons being friends}. Those images become symbolic and address some aspect of your {the dreamer} psyche so to convey an emotional conflict or strong influence.

In the dream Katie worked at a branch a few 'towns' away. That branch would be a branch within you, again shared aspects you have with her. A town would be symbolic of your whole self {a citizen would be only a part, a town the whole}. Blockbuster is a place where she works. Work is often symbolic an anxiety about a current experience in your life {conscious and or unconscious}. This aspect of the dream suggest an anxiety to do with Katie, a person you relate to because she possesses qualities you share. The anxiety would be in relationship to those shared qualities but she would be you.

When you got there, or go there where Katie works, she is grey looking and not herself. This statement would be pointing to you, you and Katie being the same person because of the shared qualities/experiences/traits. It is you who loos grey and not yourself. Something is out of whack, not normal.

The other staff member would also be a part of you {unless you actually saw Katie in real life bite someone on the neck}. This is indicative of a vampire, biting someone on the neck to draw blood from them. Blood, although not mentioned is suggested, would be symbolic of energy, emotional energy that is being taken from someone else. Safety is not an issue so it must have something to do with instincts. You are taking energy from one aspect in your life to satisfy or rectify something in your life that has made you look grayish, not yourself. Grey is the color of decline. Something about you has declined. It probably has to do with shared qualities/traits/experiences with Katie. There may have been recent waking life experiences to do wit Katie where you felt bad but the jest of this statement would be about you feeling bad about yourself {Katie being a part of you}.

We are beginning to go in circles with this explanation so lets go to the end of the dream and see what it has to say.

Queuing by definition is to get in line or 'fall in line', get in line with what is subscribed. But by doing that you could become a 'zombie', not your real self, having to subscribe to a work ethic that takes you away from your true self and makes you have to rely on others for your energy. Could that be what is happening to you? You have become a 'Katie' and have to live up to those expectations. The pressure is as much from within as it is from the outer world. Could you be putting too much perssure on yousrelf to live up to 'Katie's world when deep down you had rather be something a little different or in a position that doesn't require so much emotional energy to be in? The Blockbuster reference would be to the deep inner self that is becoming bankrupt because of the emotional stresses of being a 'Stepford wife'?
Does this fit?

Jerry