I just woke up and already it's fading, but the main questgiver was some young female noble... not a princess (I remember this because the land's princess was important otherwise) but still a very important heir. At first I think it was a side-scrolling, 16-bit kind of game, a beat-'em-up looking affair, where the player character basically rolls out of bed and marches off to fight evil, with the young noblewoman seeing them off and/or pestering them for a bit. I can't even remember quite what their goal was (could have been trying to kill something specific, but it might have been to retrieve some powerful item), but there was a wide, horrible variety of monsters in the way in a variety of zones. At first they were places seemingly affected and twisted by magic, but later on the hero may have been questing through hells, too.
Definitely some Nuclear Throne influence.
Early on it was some sort of top-down/isometric action game, not quite sure what you'd call the genre but basically the player character had to run around at high speeds, dodging attacks and fighting a tonne of enemies, most of whom seemed to be able to kill him pretty easily.
I'm not sure if it was multiplayer, but I know I was discussing this game at length with my friends, coordinating strategies and watching each other's runs. Seemed like the game/progress either persisted between our games or there was some weird dream logic going on which made the game kind of real or something.
Unfortunately I don't remember much else of the main game, except that it was great fun and difficult.
At one point later in the dream, however, a promising run came to an end with the character dying a nasty death. The dream handled this slightly differently to the usual roguelike death, however; this character may have been something of a central character for the dream. Let's call him Mitch. Mostly because I actually remember his name, and it was Mitch. >.>
Towards the end of the dream things took an interesting turn, with our very own Piecewise apparently running a parallel and connected RTD on the forums. In this, the party of players basically took on a similar quest from the realm's princess, who apparently dabbled in powerful black magic and had been up to some sort of no good.
It's possible that she was (at least partially) to blame for all the terrible, warped monsters and hellish landscapes surrounding civilized parts...
The RTD was basically a dream version of the real Infinite Heavens, apart from the fact that the party was apparently on a quest given by a princess. A mortal one, I'm 99% sure. There may have been a couple of the game's current player characters still surviving, although I got the feeling that the dream-game was a lot further along.
Anyway, the part of it I saw in my dream seemed to be basically a TPK.
There were big demon-looking things, there were smaller monsters, there was fire, there were hell-pits in from what I remember was a pretty nasty hell-looking landscape, and there was some sort of vessel the player characters were in (possibly the Warbeast they're riding in currently), but it was already mostly destroyed.
Most of the party was slain and the last couple of characters made a desperate bid to escape, but one of them rolled a really quite heartbreaking [1], which Piecewise seemed to take great glee in- basically he stopped writing the turn, put something along the lines of "...heh.", and moved on to the next player's action.
The next guy rolled poorly too, though not quite so bad. Some dramatic red text ensued as one of the countless enemies (clad in some kind of hooded cloak, possibly some kind of mortal demon worshipper or dark magician) approached them holding some kind of box-shaped device. I can't remember exactly what transpired after that, but I believe this last character had their last glimmer of hope for an escape smashed, quite literally, by the person who rolled a [1] falling from above and landing on top of them at high velocity.
I believe they wound up falling into a pit and slowly dying before being raised as some kind of zombies or other undead, which is a fate I'm pretty sure befell at least some of the dead PCs of the roguelike game as well. To be honest I'm not sure if how I remember the scene, with the demons and their underlings casually wandering over to the dying characters before beginning to work their magics and (no doubt painfully) bind them to unlife, actually happened to the RTD characters or some/one of the rougelike characters.
Now, back to Mitch. The dream actually ended with Mitch. At first the scene seemed much like every other run, with Mitch heading out of his quarters (which were over on the far left of the screen, given that this part had a side-scrolling perspective) and down some stairs into the castle courtyard.
Some oddities soon became apparent, however. The noblewoman/questgiver was following him along, chattering excitedly, telling him to be careful, giving mostly useless tidbits of advice and generally being excitable and nervous, that sort of thing.
But Mitch wasn't very appreciative of this, in fact he mostly brushed the young noble off in a rather grouchy manner, trudging unenthusiastically towards his task.
As the two of them reached the courtyard, from where one could reach the exit towards the dangerous areas, a woman approached the young heir. I think she was either the lady of the castle, a highly-placed servant, or some kind of healer. She expressed concern, and (I think) asked the girl who she was talking to.
When she received an answer, the woman looked quite sad, and gently told the girl to wake up.
(Mitch had faded from existence by this point, the dream-camera was now just watching the two women.)
She explained (to soothe the girl and bring her back to reality, not to provide awkwardly-shoehorned exposition, no sir) that Mitch had died some years before. I believe at that point the girl fled the scene, possibly crying... whatever the case, it turned out that the young noblewoman had been completely traumatised by the death of Mitch (and probably that of all the other people who died being sent on the same quest, I don't know), and had entered into a spiral of depression and even began dabbling in dark magic- some of it a similar kind to what the princess was getting into.
That might have something to do with Mitch's tortuous new existence, being called into life again and again to replay at least part of the same, doomed quest... quite an interesting analogy for a roguelike game (at least one where you can re-use characters), really.