Where do dreams come from?
First we'd need to define 'external stimulus'. Let's just take visual stimuli. Can you only see when your eyes are open? Or can you imagine something in your mind's eye?
Is imagination only illusion? Or can you picture your mother's face? Recall a memory of a sunset? What is illusion and what is not?
How do you experience reality?
Dreams are definitely influenced by external stimuli. Not necessarily present stimulus, but past stimulus.
I can imagine things, but maybe only when prompted by external stimulus to do so.
I define external stimulus as anything outside of "free will" that influences our thoughts.
I think reality is real, but free will is an illusion. However, I live as if I do have free will.