Let me preface this with the obvious disclaimer that this is only my opinion...
There are always exceptions to any rule but overall in the games I've played that have dream sequences they end up detracting from the story instead of adding to it. In this case the repeated nightmares that Frank had didn't add anything that a single flashback wouldn't have been able to accomplish just as well. Since Frank never remembered the nightmares the only reason for those sequences was to reemphasize Shannon's cheating to the audience. However, most players don't need to see the same scene repeatedly to understand the importance or to remember it. In addition, since we don't know who Trevor is in the larger context of the game, slowly revealing him to us over three dream sequences has no impact on the player. And with Frank not remembering the sequences upon awakening we don't get any introspective lines from him about the nightmare, Shannon, Trevor, or the phone call.
As for the "Fairy Abigail" dreams they convey the character's struggles with his growing attraction to his children, however since this is an adult game, the obvious end of it all is that Frank will choose to either fuck or not fuck his daughters (if the player is given an option otherwise they will be fucked), and the sequences end up losing quite a bit of their impact due to the medium. In addition, as a player, I don't care for lewd sequences in dreams or fantasies because they are not part of the character's reality. Seeing "Fairy Abigail" playing with Frank's dick in his dreams (or seeing him fantasize about fucking a pornstar) are unnecessary filler for a story which is strongest on building the emotional relationships of the characters. I'd want the dreams and fantasies to be cut so we could have more scenes of Frank interacting with his children or potential clients (he really must be a terrible Real Estate agent if he has one client at a time).
In the larger context of adult games I dislike dream sequences because very few are well-written. Most end up being a way to add in lewd content - such as when the MC fantasizes about having sex with other characters in the game - I'd rather wait to see the LI's naked in the MC's "real" life. Besides LOML the only other game I can think of that does dream sequences well (but not at the emotional level of LOML) is Sins of the Father. But those are more of an instructional/tutorial nature that is explaining to the MC, and player, how the MC's powers work and therefore how the game will work. Using dreams as a way to have expository dialogue works for me, especially when it deals with the sudden acquisition of "mysterious powers", within the reality of the game it doesn't make sense to have the MC learn that information from a long conversation with any of the other characters.
Anyway, my dissatisfaction with dream sequences is minuscule in the grand scheme of things. In this case chalk it up to my desire to see more emotional bonding between characters.