We can see that when we go to sleep, and aren't dreaming, the character disappears. Oh, and the world and all the other characters along with him. This is enough to show you that you/we are a product of the mind's waking and dreaming activity.
Maybe we should differentiate our individual dreams from God's dreams.
Also, does God experience the dreamless state? When there is no cosmic dream, Is he sleeping and not dreaming or just being awake?
These type of questions r so beyond our limited conscious awareness that i do not attempt to answer them and leave it to the masters to answer. But i will concur that since these type of questions can arise in the consciousness they must have some validity. Otherwise why would they even occur?
We are dream characters who are given the faculty to take life out of the dream itself. We may not know that we can take life and exit the dream. The Avatar will suggest it to us. The avatar will also give us guidelines since we don't know how to transition from dream characters to 'real persons'.
The avatar in this sense gives us hope and a way out.