This is a good topic. I think you guys are confusing the terms "logical" and "possible". Logic refers to a mathematical method of reasoning, while possible refers to what can and can't happen. Thus, the purple elphant is not illogical per se, it would just be impossible in the real world. You might argue that if something is ilogical then it is impossible (although not vice-versa), but the real issue is that in the dream worlds the premises change, the rules change, such that when logic is applied based on these premises you get a different outcome.