One thing no one's mentioned is that assuming the theory is true, the plot itself still goes completely off the rails about half way in. Dream or not, FF8's second half is still tily plotted. It might make more "sense" as a dream, but it's still written and characterized terribly.

My official opinion: It's interesting as an interpretation (I'm always interested in that kind of radical thinking for any piece of fiction), but not as an excuse for the game's shoddy storytelling.