The Problem with Time
I think that the main problem that we have here is that in order to define time, we always end up using circular definitions. If you read up on it, time is always based on how much time it took to do something in respect to something else. We originally based a second off of something big, then we based it on something small. Basically basing it on something small enough that we can't effect it or big enough that we can't effect it either, so it is always the same as far as we can tell. We then found out that certain things cause a dilation in time, but we by no means think that we know all the reasons that time does what it does.

So I guess what I am saying is that we are always talking about time, like it is this huge constant stream running forward, but there is already proof of time dilation, and we barely know anything about it really. We base time off of "vibrations in a molecular system" right now. Since consistency is what we determine time by, we can easily say that time can't be measured in a dream in a traditional sense. So the only thing we can measure is our "perception of time", so if you can make a dream feel like a week, then it is all that matters.

Or you could change the molecular vibration of dream ammonium, it would technically dilate time since that is where we get a second. jk, but really.

You may say that our mind would have to process things faster in order for time to dilate in a dream, but there is no proof of that.