I've found that dreams are a great place to explore and resolve inner confilcts. However, depending on how deeply disturbing and/or intrenched the problem is, it can take more than one LD confronting and working to resolve it to "fix" it for the long term.

Plus with things that scare the pants off of you IWL, yes you can use dreams to get more comfortable with them. If one of your fears is something like being eaten alive by a shark you can become less afraid of the sight of sharks, and even being in the water witrh sharks. However, if you have the bad luck of actually being bitten by a shark in waking life, it probably will still scare the crap out of you, obviously.