Except the dream world is nothing more than a hallucination of the character's sleeping minds, and not an entirely lower level of reality created through unconscious reality warping. We don't consider Matrix characters that can interface with the entirety of the Matrix Low 2-C from the Matrix' perspective. This is the same thing.
Again, dreams and spatial dimensions are explictely different, which also creates the problem of you assuming that lower-levels of dreams are lower-levels of reality further, which creates the ridiculousness of normal humans at 1-C.
You have yet to address the simulation hypothesis, which shows that you can have an "Infinite hierarchy" (God I hate this term) of reality and simulation in real life, without the need of spatial dimensions or metaphysics.
In fact, each simulation is 3D and has a flow of time. If they were truly following a dimensional principle all dreams would be 2D, and dreams within dreams would be 1D, and then 0D.
This doesn't happen, showing that the relationship between reality and dream is not like that of Spatial Dimensions.
And no, we absolutely wouldn't. That is ridiculous, and innacurate. We aren't Low 2-C to our dreams. You can't powerscale real life to dreams because the later isn't something that can be quantified or treated as real in the first place.
"You can't say "For the sake of the debate, this being is truly 4-A but it doesn't exist so it can't be higher dimensional"."
I can absolutely say that they aren't higher-dimensional because they only show 4-A feats. I can absolutely say they aren't higher-dimensional because they are in-fact lower-dimensional going by this logic, with the highest level being the mundane 3D reality. You are treating mental hallucinations, dreams of normal humans as outright multiple levels of infinity above the real world.
This is absurd, and I'm sorry, it can't go through.