It sounds more than OK to me; it sounds pretty fun I think your players will probably like it too, but you'll never know for sure until you give it a whirl.
I just woke up a little bit ago from a wacky dream and it never ceases to amaze me how quickly (and without any cohesive reason) the plot, scene and characters change. I mean one minute I'm talking to my neighbor in his garage, an old-timer telling me that Jesse James slept there once upon a time, and then, quite suddenly, I'm wearing a tuxedo and riding a skateboard into the local drug store..... Point is, you could possibly play on that element of dreams - the semingly random array of plot devices. They could be like storms rolling across the dream landscapes - harbringers of monsters in tuxedos..
This idea can go a lot of ways, and has a lot of potential. I think you need to work out just what is possible in the dream worlds.
And watch A Nightmare On Elm Street a lot . All of 'em.