Here's what Notch should do with dream worlds:
Every time you use a bed, you can either wake up or go to the dream world. This is selected at random but is more likely if you have low health when you go to sleep. The dream world will sometimes be like the sky dimension, but other times will be completely identical to the real world to the point where you won't be able to tell if you are awake or in a dream (just like real dreams) and you will spawn in the dream world right next to your bed. This will go on for a few minutes, but will end if you either die or get hurt more than a half of a heart. If the dream ends on it's own something bizarre will happen. A giant creeper might threaten to explode, or a pig will grow wings and fly, an aggressive wolf pack will attack you, or in some rare cases, Herobrine.
I have no idea how that would work in multiplayer but it sounds awesome.