If you look at the dream from Harry's point of view, and what Harry knows and doesn't know at this point, the Draco turning into Snape makes a little more sense... Harry thinks Snape is evil. Therefore, I don't think it's a stretch to have a dream that Draco turns into Snape (but Harry doesn't know yet that Snape isn't as evil as he thinks he is).
Do you have any memories that you
think are memories, but they could be dreams or skewed perceptions of memories? Like, I clearly remember Glinda, the good witch of the North, being at my great-grandfather's bedside as a small child... That is obviously a skewed perception of real events (my great-grandfather had a nurse with wavy blond hair and she was wearing a pink shirt... there's a picture and she's barely in it). Harry remembers a flash of green light from the "car crash" that killed his parents, but why is there a green light there? Later, he finds out he actually remembered it exactly, but the car crash story, along with the flash of green light, didn't exactly add up until he finds out James and Lily didn't die in a car crash... maybe this dream is the first time he kind of associates the flash of green light with Voldemort and his parents deaths? I mean, it's not that hard to imagine that, after Hagrid tells him that James and Lily never died in a car crash, that he would think that the flash of green light was just a dream or something...

I'm confusing myself...