In a third-person novel I am writing, one of the characters has a very significant dream that I would like to transcribe. The problem is, I would like to focus on the character's reaction to the events in the dream, but do not know whether it is realistic to have her reacting as the dream is happening, or have her react to the specific events in the dream after she wakes up.
[while dreaming] Rhea understands what this dream is now. It's how Dr. Evans imagines it will be once he has the kids under his control. Even so, only in his dreams would he ever be able to call Colton "son" without getting hit. Colton replies with a terse nod, showing that he doesn't desire to return the feeling. It encourages her to know that even in Evans' dreams, Colton isn't comfortable being referred to as "son" by this man.
After Rhea wakes up, despite the unsettling images she has just witnessed, she finds a small amount of solace in the fact that even in Evans' warped dream reality, Colton still wasn't comfortable by being referred to as son by that man. Especially since, in real life, her brother would most likely attack the man if he ever attempted to refer to him as such.
So, simply put, should I write the dream sort of like a flashback, merely narrating what happened and then have her wake up and analyze it, or write the dream like normal narration and show the character's reactions as the dream events happen?
(I should mention that this character has the ability to see dreams that are not her own, and knows when she is dreaming, and when the dream is not hers, even though she cannot interact with the dream-world or control her actions within it.)