1. You can't conclude anything about the real world. The waking world might very well be in similar state to the dream world, it might have been a mirror of the real world drawn from the minds of its residents. Everyone in the dream world might already be dead in the real world, and that could be what the whole "accepting your own death" thing is about. It also might be that everything that turns into a re-spawning beast never returns to the real world.
2. The dream itself is reality for the Great Ones, or at least a plane of reality. It's where they have their babies. It becomes your reality in the bad ending and the true ending.
Every hunter in the game still remembers the dream even if they can't dream anymore, and my explanation accounts for that. You need to stop dreaming and then be killed. There's a reason why gherman needs to murder you for you to wake up in the "real world". I also think Yharnam is real, but the version of Yharnam that you see isn't.
He doesn't say "what's happening right this moment" is a dream. He says from the point he gives the blood to you on is a dream. I think he's only dead in the dream world in the same sense that the guy asking for a password is dead in the dreamworld. They still have enough of a connection to it that they still remember it.
Honestly the story is really convoluted and it's really hard to understand the details, which is something that personally I don't like.
I think the player deserves to be rewarded at the end with something that makes sense.
But I see many problems with the everything is a dream interpretation.
First of all the player is a foreigner who arrives in Yharnam from the outside, he certainly doesn't belong to a dream at the beginning of the game and the Yharnam we see in the intro is not a dream.
He is interested in curative blood and we might speculate that he was invited to the Cainhurst castle to become a vileblood.
Then he accepted to make this blood contract and become a hunter.
At that point what is dream and what is reality is not fully clear.
There's something which we may consider though, as I said the story has a premise which is absolutely grounded in reality with Yharnam people finding gods and wanting to be like them and sharing their knowledge.
Second thing, the Great Beings are able to live and interact in dream dimensions (the Mensis nightmare where the first red moon ritual took place, the Hunter's Dream where the moon presence takes Ghernam as a prisoner).
They are not able to interact with the Yharnam the hunter can visit until Rom is defeated though, we might sense their presence on a parallel superimposed dimension with enough insight but they can't do anything, their only influence is creating portals.
So I don't think that Yharnam is a dream otherwise they would have no problem interacting and impregnating women just like it happened in the Mensis Nightmare dimension which is their ultimate goal.
I understand though that the endings add confusion in the sense that it's not clear what is a dream and where the actual body lies while dreaming.
My guess is that dreams are the equivalent of dimensions here, so the actual body travels in the dimension where it is 'dreaming'. If you die in that dimension you get out of that dimension and you wake up somewhere else. Getting killed in the hunter's dream simply means not being able to access that dimension anymore and losing all the memories associated although considering the player wasn't strictly trapped there like Gherman it doesn't look a big deal to me.
Also it's not clear at this point what it takes to have a permanent death.
Btw do you have an idea about what happened to Mergo?
Was he killed long ago and the Nurse kept the cable? Do we kill him when we kill the Nurse? I don't have any idea about who the mother, the woman in the wedding dress who looks like the corpse bride, is.
Are we going to have to clear answers about the story by developers in a guide or somewhere else?