Depression has a very wide spectrum, with so many sub groups. I think the original response on depression increasing dreaming is too grand of a conclusion... From my knowledge and experience, depression can be tied to reduced levels of dopamine and the greater level of dopamine tends to produce more vivid dreaming. So less dopamine can cause less dreaming. Also, insomnia can be a symptom of atypical depression, which can induce shallow sleep, causing non or less dreams. In addition, insomnia medication can reduce REM sleep, which reduces dreaming.

On a interesting note, anxiety can cause one to awaken from a dreaming state too early, which can cause two unusual phenomenons. First, when you dream, your body paralyzes it's self to prevent one from acting out his or her dream. When awaken from a dream too quickly, you can experience sleep paralysis; inability to move, speak, etc, for a few seconds. This has happen to me and it is scary. Second, if awaken from dreaming too suddenly, you can see a temporary hallucinate, as if the dreaming world and real world are still intertwined. For this reason, people have reported seeing demons, aliens, etc, upon awakening. This has been documented in allot of old literature. It only last for a few seconds. My overall point here is that depression, which can coincide with anxiety, does do interesting stuff to our sleep and dreams.

Overall, I do not think that such a general conclusion can be made about dreaming being increased, but how dreams are altered by mood is interesting.