No, he doesn’t have to know the person, but if he does, he can make the nightmare more specific. Yes, about anything. Maybe good dreams, he doesn’t know. She laughs when he says this, but he isn’t sure why. He didn’t give Jeremy a nightmare, but he agrees that would’ve been stupid. What happened was the blowback. For every nightmare he gives, he has one. When he has nightmares, the monsters bleed into reality for a few minutes but fade away when he wakes up. Yes, it hurt him. They always do.
Lastly, she asks, “Is that why you’re here?”