I love hearing about the conspiracies of this game, and I thought Squall is Dead and Rinoa = Ultimecia were really creative, but since having played FFX, the Squall is Dead/Dream thing reminds me too much of Tidus' story, so I would kindof hate it if that was the actual plot of the game. But I always love speculations like these.

Here's some info on the R=U theory.

This theory is attractive because it provides Ultimecia with the depth, background, and motivation that many felt she lacked, but the evidence supporting it is purely circumstantial. Some point out that if Ultimecia wanted to regain Squall, she probably wouldn't have tried to kill him (though use of Guardian Forces erases memory so it's likely she wouldn't recognize him at this point).
Here's an entire site devoted to Squall is Dead.

And here's some info on why the Squall is Dead theory does not work