You can create 2 types of dreams, video or hybrid.
For video you will need to end up with a mpeg or wmv video.
Hybrids can be created from a png back ground, png images, and nwa animations. You can use the frame builder in skin studio or use the one in the deskscapes directory. There is also a pdf file theat goes into some detail of how to create the .hybrid file but the best thing is to use Windows note pad to review one that's already created.
Theres a thread that should help you get started that I posted a while back. How to create dreams