I am going with the second definition. By this definition, it is impossible to be \"conscious\" and be \"dreaming.\" While dreaming no limitation exists, limitations are the defining factor for a personal identity. If we all can do whatever we want, then we are all equal, and have no defining identity--thus destroying conscious thought. In the \"reality\" that the general population lives in we are individuals with different traits and varying strong and weak points. [/b]
If we are dreaming and can do whatever we want, we still have a personal identity... not everyone is going to do the same thing, that makes us unique. Personality comes into play, in our dreams are personalities are still the same, we still behave towards things in our own way.

We may be all equally powerfull in potential ability, but we are not all equally challenged. It is hard for some people to fly, and easy for others.

Everybody dreams different things, some things are the same, but most things are completely individualized. How can you say that dreaming destroys personal identity. Dreams are unique, dreams are very self defining.

And yes there is one limitation to dreaming, it is the limitation we put on ourselfs... thats another thing that defines us.