It's not a dream sequence. Tarantino has said that the main reason the flashback is there is to establish Cliff's physical strength at that point in the movie.
Then if that's the case, it's rubbish, and it doesn't even clearly present itself that way, because he is shown actively thinking about it, instead of it being presented as an actual event.
Because it's him thinking about it, the natural take for the viewer, who knew anything about Bruce Lee, would be that it's the distorted perspective of a guy who isn't remembering accurately, which is what Cliff ends up looking like... Some guy who
imagines that he's somehow better at fighting than Bruce Lee, instead of it being definitive. As a result, he doesn't come off as strong, just full of himself, & probably deluded. I mean the only people he really puts down in the movie otherwise (Meaning not filtered through his own imagination) are a worthless hippie & a couple hippie girls... & probably his dead wife
Why would he even need to mull over the reason why that crew wouldn't want him around? It would be obvious that if he had really kicked Bruce Lee's ass, & damaged property on a set, he'd never get work. There'd be nothing to ruminate over, unless he's fucking dense lol. This is why I was led to believe we might actually be seeing him play out a scenario in his head, where he might get himself in trouble working there
If that scene is supposed to have actually happened, then the movie looses even more points in my book for being total nonsense. There's like half a dozen reasons why the real Bruce Lee would never even find himself in that situation at all. He didn't challenge people to random fights. He might have made claims about his techniques, directed at other marital arts experts, but he didn't brag to random people at work about his skills, and he'd never get in a scrap at work, simply because some guy mouthed off at him. Bruce walked away from guys like that constantly.
Plus, that big kick of his was not a technique he employed in real situations like that. It was a power display, & it was mostly meant for movie stunts. There is nothing of Bruce Lee in that depiction except a decent imitation of his voice. It comes off more as someone thinking Bruce is like the characters he plays in his movies, which is why it seemed imaginary