I very rarely remember my dreams when I wake up, and when I do I usually forget them in a matter of minutes after. Most of the time I am simply aware that I have dreamed, and often I will even know what the dream was about, but the dream itself will elude me completely. With what I do remember from dreaming, and from what I researched on the subject once, dreams are indeed capable of convincingly fabricating impressions through all of one's senses. Whenever I sit down and really focus on a game (which I tend to do whenever I start an intended complete playthrough) for longer periods of time I, too, often dream about them... in fact I have occasionally gone to bed annoyed at a game because I reach an impasse of one kind of another, only to find an answer to the problem in my dreams (whether that answer actually works in the game has varied, though; the rules in the game and the rules in the dream tend to differ). I also frequently view the game-character as myself in dreams, even if I am aware that it is a game...
There is admittedly a lot about my dreams that I just don't know about because I forget them so easily, but I do know that I view myself in third-person sometimes, or that I dream as someone else than myself... and that I will switch from being one person to another in mid-dream, not as though I transform but more as though the viewpoint just changes. Similarly it's not unusual for me to dream that I am several people at the same time, and that I am equally convinced that I am every actor in the dream (one dream that for some reason stuck with me was one in which I was running from a monster (it was only ever implied that it was a monster... I never actually saw it) which was also me (as in I controlled/viewed the dream from the monster's viewpoint as well as my own)).
I find dreaming highly fascinating... especially the concept of lucid dreaming. To be aware of the fact that you're dreaming and able to control everything, create anything, do anything... I would really like to try that, but the times that I've actually managed to become lucid while dreaming it has always caused me to abruptly feel extremely conscious about the fact that my eyes were closed, and I felt an irresistible urge to open them, thus waking me up and ending the dream. Quite annoying, really. According to what I've read there are a number of ways to somewhat reliably check whether you are awake or dreaming, the simplest one that I prefer being to just pinch your nose closed and try to breathe through it; if you can't you're awake, and if you can you're dreaming. They also say that if you lean against something in a dream you'll fall through it, and that if you jump straight up you won't fall back down... and that if you look at a piece of text, look away and then look at it again, the text will be different from when you read it the first time (this is all second-hand information, though; I've never been aware enough of my dreams to notice stuff like that).
One thing about dreams that I have read and somewhat personally confirmed is that your mirror-image is different. People say that if you look at yourself in a mirror in a dream you won't see yourself as you actually look, but the way you subconsciously view yourself. This particular detail has stuck with me, because a year or so ago I had a dream in which I briefly glanced at a mirror, which was at an angle so that I could only see my right hand in it, and immediately woke, sat up, gasped, whined and cried - which I've never done before. I wanted to scream, but luckily I was borderline hyperventilating and couldn't. The sight of that hand has been burned into my mind since that day... looking as though it'd been fed through some kind of machinery, the skin ripped and lacerated, covered in blood, flesh torn so bad that the bone showed many places. I've gutted fish and seen gross movies and such and haven't been particularly bothered by it, but somehow this was infinitely worse because I for some reason was absolutely convinced that it was my hand. It does make an eerie kind of sense for me to view my hand like that, given its condition and the fact that my hands are in near-constant pain, but regardless that single event made me resolve never to look at a mirror in a dream again.

Returning to the questions from before, the mind [I]is[/I] a result of what the brain does, but it is also a result of what the soul does. Most of the time these two will be in accordance with each other, and causing one to work differently somehow (such as through illusions) will also affect the other. If the two come to be desynchronized somehow it can be really bad for the person; one could develop all kinds of mental disorders from brain and soul being in disagreement.
As to the matter of half-swording, I read up on the subject some more and while it does seem like it could be done with just about any regular sword (since apparently a blade won't cut if you just hold on to it tightly, but only slice if you move along it) I still don't see it as being safe to do with Roct. Not only is Roct razor-sharp (which [i]is[/I] unusual for medieval swords; it is generally agreed upon that the average sword had a sharpness that was about the same or slightly lower than that of an average modern kitchen knife, since if it was any sharper it would chip too easily) but it is also extremely smooth and relatively frictionless... Even if it was possible to hold it by the blade without cutting oneself, it seems likely that it would slip and slice one as one used it like that. The gauntlets would help, but meh... it still seems like Jaelnec wouldn't be comfortable with running that risk.