in my experience, there's an initial disorientation when i shift to the dream state (step 4). but most of the time, as soon as awareness shifts, i still have some awareness that i'm dreaming and lying down in meditation at the same time. at times, i can even hear myself snoring. then i just note it

i understand that Tibetans have highly developed dream yoga techniques. but since i choose to practice vipassana, this is my own way of incorporating my practice into the dream world. again, VILD is *not* a replacement for vipassana, it's my own approach for extending awareness in the dream state and continue with my chosen practice.
if you decide to give this a try, let me know how it works for you. we could use more data points. but never let the dream state be a distraction to our waking practice.
thanks!
~C