A fun game, a nice twist on the usual glue-down-the-trigger shmup gameplay, and funny mid-level cutscenes. While all the artwork individually was fine to good, I did miss a sense of cohesion. The dream-nightmare sprites have a rather different style than the ship for instance.
I would recommend eithr adding a score penalty to letting nightmares through, or adding a total high score of some kind. Right now, once you get a positive score there's no pressing need to try and shoot anything down.