Child confusing dreams with reality?

So my oldest is going to be 4 next month, we don't have any issues with him during night/nap time, he has always been a deep sleeper and wakes up in an awesome mood. But today DH went to wake them up from their nap, our 2 year old was happy but Alex was super upset and didn't want anything to do with DH, I had to go up there and comfort him...I cuddled with him and sand to him. When he finally calmed down I asked him if he could tell me what was wrong and he said he was upset daddy was leaving and that daddy didn't love him...that he knew that was the truth. I told him that daddy wasn't going anywhere and that daddy loved him and his siblings very much and he would never stop loving them. He then told me that if that was true then why did daddy rip the heart that he drew yesterday and that it broke his heart...this is what led me to the conclusion that he must have been dreaming because that didn't happen. DH spent some alone time with him at first it was bad because Alex told DH he didn't love him like 3 times, I could tell DH was hurt but he just kept talking to him until Alex was happy again and he was back to his normal self playing around and being the daddy's boy he is. We tried to explain to him what dreams were but I think we confused him more than anything. DH was left with a very uneasy feeling he feels like he did something wrong but he loves them to death...he's very hands on and spends pretty much all his free time with them...

Has anyone experienced something like this? how do you talk to a kid about dreaming and reality?

Right before Tanner turned 4 he was convinced that his Aunt Sarah ripped his teeth out. And he was so confused why he still had teeth. He kept telling everyone his Aunt took his teeth out. I told him dreams are like books we read, they are like stories that don't really happen. He still talks about his dreams but now he is good.

Quoting Smartass *TTC*:" Right before Tanner turned 4 he was convinced that his Aunt Sarah ripped his teeth out. And he was so ... [snip!] ... are like books we read, they are like stories that don't really happen. He still talks about his dreams but now he is good."

Aww I felt so bad because I could tell that he was really thinking DH was leaving...the book comparison is good, I like that explanation.