I encountered the Gray Man in a flashback multiple times, and if I'm correct the original behavior is supposed to erase and end the remaining flashback instead of having the same effect as a normal dream.
So the night is darkening, this, and dread delusion all take place in the semi-same world. But angel war is god war, and did Endlyss become the Endless region with the royalists and cadavers? Trying to figure out the canon.