But it does also, as a viewer, puncture the idea that either reality is a dream world.
I definitely agree. But I was surprised at how much trouble I had conveying that to people. I kept hearing, "Well, I've had dreams where I was watching other people and wasn't actually there in the scene." But the problem with that explanation is that you still know
what happened in that scene you theoretically weren't part of. If Michael had just been dreaming the scenes he wasn't in, then he would've known about the things people were keeping secret from him, but he didn't. So either it was evidence that both worlds were real, or it was a sloppy use of narrative viewpoint.
Hopefully the finale this week will give us some definitive answers about all this. Since the show's been cancelled, this is the last chance to provide some explanations and/or closure. Though since it was presumably made before the show's cancellation, it'll probably be at least somewhat open-ended.