i could refer you to
my unpublished novel "neckties and other dreams". in that, i used dreams as segues between scenes to demonstrate the thoughts that the narrator wasnt conscious of during his telling of the story. and also to clue into other meanings of scenes/plot.
i personally really enjoy dreamlike sequences, especially as kafka worked them. when they are done like that, it adds to the atmosphere. dreams are a common feeling more many people, so when a writer uses dreamlike narration, he or she is tapping into a great deal of shared consciousness with the audience, and the possibilities are endless. in narratives such as these, and also considering borges, the borders of fiction narrative are stretched so beautifully. you have the flowing language as well as the surreal nature of the book's reality, and this, for me, really demonstrates the possibilities of prose.