I believe that the reason we sometimes feel as though a long passage of time has passed in a dream is simply that the brain switches from the feeling we get when we first start doing something to the feeling we have when we have been doing something for a long time in order to give us the illusion that we have been doing whatever it is we are doing for a while. I have actually caught my brain doing this during a lucid dream. I was folding a cardigan during a lucid dream and suddenly I attained the feeling I'd been tidying my bedroom for ages but because I was lucid I knew this wasn't so. It was quite an interesting experience.

I think the brain does something similar to when you are watching a movie and the picture fades out and then with the next scene are the words "3 years later...". In a split second our mind imagines that length of time and somehow compresses it. It's hard to put into words. Our brains are able to make the adjustment for whatever length of time is said to have passed in a movie eg "10 years later" vs "6 months later" or even "one year earlier".

Hopefully this post might put an end to any arguing on the subject. I mean, it's obvious to me that the brain is simply able to simulate the passing of time just as it is able to simulate dreamscapes and conversations with DCs etc.