House on Hook Street help

[Crazed Pilot]

DMing House on Hook Street for one player adventuring with one rotating NPC. It's been a challenge.
We are currently studying the book to learn the ritual to enter the dream realm, and the player decided they weren't going to sleep anymore. They just keep casting lesser restoration that one of the NPCs has access to. They aren't regenerating all of their class perks since they aren't sleeping, but a lot of the nightmares and abilities of the bad guys aren't coming into play. I've started giving them some daymares/hallucinations because I figure that's reasonable if they aren't sleeping. You're brain will just start going funny. Plus they made friends with the Brotherhood of the Spider (why would Mog Lathar randomly attack them, anyways?) and missed all the spooky haunts in there, so how else am I supposed to get those juicy tidbits in?
My question/confusion lies here then. How can I best use the assassin and the hound if the characters aren't sleeping?
Can the characters sleep once they physically enter the dream realm? What happens if they do, as in, where do they dream to?
Has anyone had a player not sleep? How did you deal with it?
Has anyone made friends with the Brotherhood of the Spider, and what did they do?

[W E Ray]

In Nightmare on Elmstreet, remember, the characters didn’t know they were dreaming at first.

1) Reward the player for choosing to not sleep! Make it so that he has made a good choice.

(When I ran this a few years ago we had several sessions where the PCs didn’t know if they were dreaming or not. It was very successful.)

2) Put the PC to sleep without him realizing it. Whole roleplaying encounters. A combat, even. The player believes his PC is awake the whole time. Then he wakes up — maybe even after his PC is killed in combat. He wakes up from a nightmare.

3) Make the player see something, in a dream, where the Mog Lathar Brotherhood is planning on betraying him — sacrificing him even. He won’t even necessarily know if he witnesses this in a dream or reality. …. Then, have the betrayer meet him on the corner and feign friendship. A bit of dramatic irony, the PC knows the cultist is planning on betraying him, but the cultist doesn’t know the PC knows.

(I also had the PCs, when they didn’t know what was dream and what was real, go out one evening when the city was covered in webs — a reality Mog Lathar was bringing. The PCs were not sure if it was dream or real.)