The nightmare thing sounds like "sleep terrors" which is common in children, you should try looking it up..

I can totally empathize with the dream-reality thing, I can't say if it's normal or not but I often had dreams in which I was me and my family was my rl family and something happened and I totally thought it happened and sometimes it was something stupid and I'd get really mad at them (irl) and they'd be hella confused and later I'd explain why I was mad and they deny ever having done it, lol. Sometimes, I imagine stuff in my head too, and years later will talk about it like it actually happened. O_o I don't think it's "weird" though, just a coping mechanism. Plus it's fun to make up new happenings for yourself xD