KJP...I could have written your post!
DS 4 has a very difficult time falling asleep. Like ABQMom, we've started allowing reading at bedtime. I've found with DS, adding privileges works much better than taking away things as a consequence. So, we added a dimmer switch to his lamp that he can control...on the condition that he stays in bed except for trips to the bathroom. It's worked so far, although it's a combination of reading/singing. I've also found that he needs a consistent wake up time. Even letting him sleep in an extra 30 minutes will make for a more difficult sleep time.
We also use the "Indigo Dreams" relaxation CD. I'm not sure how much it "relaxes" him at bedtime, but he is used to the routine, and when we traveled over the winter holidays, it helped him calm down in the unfamiliar hotel room.
As for the vivid dreams, I crawled into bed with him at 6:00 this morning to calm him down. (When he was still in his crib, we'd pat his back and try to say soothing things until he fell back asleep.)
