I've had dreams about waking up in succession, but have not experienced a time dilation.
Do you dream you are falling asleep, having an inner dream, and waking up again to the outer dream, to discover less time has passed than expected?
My theory is that the memory of a dream is actually formed instantaneously in the brain, not over whatever span of time you feel like has passed in the dream.
Have you ever dreamed that you've spent an hour trying to turn off your alarm clock, but in real life you wake up and it's 1-minute past the alarm time? How can you have had this long complicated dream involving an alarm clock that won't turn off, but you've only really slept 1-minute through the alarm? My answer is, as I said, the dreams happen instantly but your brain just thinks time is passing in them because it's a false memory.
I think the idea of each inner dream happening faster than the outer one is probably just an Inception thing.
Fast dreams might not need to be an "instant" false memory. It seams possible that a dream could actually happen much, much faster than your "normal" sense of time, it's entirely synthetic so there is no sensory bottleneck. But it would take more energy to experience it this way.
I'm basing this theory off of the time I had several long, detailed dreams in the 9 minutes between pressing snooze and the second alarm. I woke up bewildered and worn out, as though I had been up all day. Worst "snooze" ever.
I've on a few very rare occasions been awake/conscious in real life, but also still dreaming. That's really weird when that happens. To explain: once I was awoken by my wife getting ready for work, I said some words to her, while in the back of my mind the dream was still happening. I then went back to sleep and returned to the same dream in progress. It wasn't like I was talking to her in my sleep and didn't remember it. I was fully awake and making new memories, while still dreaming.
The best analogy that I can make that you might be able to understand is. I have multiple streams of consciousness. One level I use to think about what I'm going to say when speaking to someone, but at the same time I could be counting in my other stream of consciousness. I assume that's how most people's brains work. I think when the dreaming-awake thing happened, the dream was in one stream and the awareness was in the other.
It's a strange feeling to be aware that you're in a dream. I've never really managed to get complete control of the dream.
Except, I can't remember if my dream text look that way before I was exposed to AI art, or if my dreams were influenced by my memories of AI art text.