User blog comment:Madman97/The Aedra Vs. The Daedra theory/@comment-7953253-20131011092738/@comment-25109952-20131012231212

It is. It's been confirmed even in-game it's a dream. Black Book Something or other says :

"the ramblings of an uncaring godhead"

Boom. The Mythic Dawn Commentaries also say something (I think), and the Mythic Dawn books in Oblivion also confirm it.

Also, I'm an Omnipotent Dragon, not a sheep.