She got revived and has probably no idea that Wander did it and that is fine, no problem there, she doesn't have to know through how much pain he wen't to save her.
Wander was told by Dormin that the price will be big so it was pretty obvious to him that he will not survive this whole thing, lucky for him, he did survive and was reborn as a bonus.
And ICO's ending being a dream is kind of dumb, why would it be a dream ? Dead people don't dream. The way I see it, he was knocked out by the blast from the Queen and woke up later. Yorda was freed from her prison when the Queen died and the castle collapsed and ended up on that shore.
All in all, super happy endings.
It doesn't fit the tone of his games at all.