It's interesting to hear your account; I have only heard a few others mention similar, one or two of them described similar happening while meditating as opposed to during sleep, but that never happened to me.
Hmm, yeah I do have fairly strong visualization abilities, so it could have something to do with those increasing. Thankfully my visuals aren't nearly as substantial or long-lasting as you're describing, I mean I get through it ok every time but it's annoying and more than a little frightening at the time. The dreams are also as you say, very vivid and often at least borderline nightmarish, though dreams I have following waking up from that one are usually pretty neutral.