The Dev has stated on Patreon that the dreams do have a connection to the game. For the daughter's dream, I noticed that she got wet fingering herself while watching a man she thought was her father having sex. If she notices that, it could affect how she views her sexual attraction to her father. The father's dream hasn't finished yet in Day 7 Dawn, but the daughter is in it, and she could return to the hotel during the father's activities with the 2 girls, and what happens then could also cause the father to change how he views his attraction to the daughter.
Now whether these effects (assuming I'm close to correct) on the dad/daughter relationship are worth the digression, or could have been effected differently with "better" writing is probably an individual preference.
Now whether these effects (assuming I'm close to correct) on the dad/daughter relationship are worth the digression, or could have been effected differently with "better" writing is probably an individual preference.