Unless you wish to posit the existence of some kind of supernatural soul or self, then dreams are a product (and thus connected to and representative) of objective reality.
Moreover, I do believe that they accurately represent reality. I think most of us have dreams which for the most part accord with our day to day experiences, and many practised oneiromancers find dreams useful in guiding practical action. Indeed, many people awake from dreams with a newfound and seemingly intuitive understanding of themselves, other people and until then problematic real-life situations.
As for whether or not they can be "used as valid evidence for a theory", the obvious answers would be either a) yes, as they already are (even outside the FE/RE debate), or b) maybe, as whether or not they are considered valid evidence for a theory depends entirely on the theoretical framework in question.