Some thoughts on the idea of time dilation.
Even if you think of the brain as like a computer processor, with a maximum megahertz, with maximum physical hardware limits, you still cannot say that we are operating at the maximum speed. Even other animals like cats or flies, using the same basis for their neural systems (approximately), they have reaction times faster and quicker. Hummingbirds and other animals that can think faster because they can move faster.
So, even if the brain does have a physical limit, a cap to how fast you can think and feel emotion, that limit is not being reached. We have slowed it down to approximately how fast our bodies can move, due to muscle friction and mass/intertia limitation. If we thought any faster, we would tell our body to walk and it would take like… ten hours just to lift our left foot, because our brain was thinking too fast for our body. Then it would take another ten subjective hours to lift our right foot. So, our thought processes get slowed-down to the perfect speed for real-time feedback from our bodies. [I wonder if everyone’s minds are synched at the same speed… slight differences accumulated during the infant synching phase, due to genetic variance or physical differences could lead to mental excellence.]
SO, even if, in fact, dreams take place at the same speed as reality (i.e., even we cannot dream a lifetime within an hour nap), the logic above implies that theoretically, if we allowed the brain to think faster, we COULD dream faster, perhaps dream adventures lasting weeks within a single night’s sleep. It’s possible, even though the evidence seems to indicate that in practice the brain doesn’t ever let go of the boundaries that slow it down.
There could be practical reasons for this, such as that it would create a dysphoric, painful transition back into the slower body. Even though the brain as a processor is capable of running at ten times the speed it runs while awake, maybe it doesn’t because it is risky. After a dream, your speed-of-light dream body would be a far cry from the slow real body, and it might take some re-synchronization for your brain to get re-used to your real body. This would be bad if there was another caveman about to bash in your brains and you had to wake up quickly and fight.
Also, the memories accumulated during a limitless dream time might overload the neural networks, and might dilute memories from waking life with the more recent dream memories. That board meeting yesterday would seem like years ago and you would wake up after a ten year adventure and barely remember the board meeting.
Eventually, you might actually deplete the brain’s “theoretical maximum memory space”, or at least clutter the memory-webs with so many cross-references that thinking becomes painfully slow because each memory invokes too many irrelevant cross-references. (Like in free-association exercises.) This could also be a reason that you usually forget your dreams, and why dreams seem to “erase” themselves if you don’t practice the fine art of remembering them by bringing them into conscious thought to remember them.