Bad Dreams is a key episode in the mythology of Fringe, introducing to us another Cortexiphan subject -- Nick Lane. The connection that he and Olivia share from the past allows her within her dreams to see what he is feeling and experiencing. Nick is hyper-emotive and highly infectious. His feelings are killing people. Olivia can see and feel what Nick Lane sees and feels. Olivia's mind is capable of translating what Nick feels into images her mind can recognize.
New Questions raised in this episode that remain unanswered:
Ella gets vaccinated. Perhaps there is more than meets the eye.
Nick Lane had a very comprehensive military policy. Where did he get this from?
Cortexiphan, a highly experimental drug -- might enhance predisposed abilities in certain children. It worked on perception. "Perception is the key to transformation." The key here is "certain" children. How did they determine which children to run the cortexiphan tests on?
While Olivia is put under REM sleep and she tries to find where Nick Lane is at she becomes stressed from watching him murder a dancer. It is Peter that reaches out and takes her hand which calms her down. What is it that helps her calm down? His touch? Something else?
Why is there a scar with the number "2" on Nick Lanes face? What about the tattoo on his right arm?
"Olive, you heard me." Nick intentionally sought her out. It seems he remembers the drug trials. Were they capable of doing this as children? How much so? Speaking to each other telepathically? Or through dreams? Perhaps another way?
Other Notable Stuff:
In the beginning there are red, blue and yellow balloons tied to the girls stroller. It is the red balloon that floats to the top of the ceiling.
Olivia's wardrobe we see for the first time, all blacks and grays.
"Why do I feel I don't fit in, anywhere I go." Walter sings this line.
"Must be a terrible thing, not to be able to trust your own mind." Peter Bishop tells Olivia this while waiting to speak with the doctor regarding Nick Lane at the mental hospital.
Nick remembered about the past, Olive, and the coming war against a parallel universe.
Nick was born in Jacksonville, Florida. He too was a Cortexiphan test subject. The children were paired together, to keep them from feeling isolated. Cortexiphan may have greatly amplified the bond.
Peter: "If you can make a better world, you can dream a better world."
Walter:"Or perhaps travel between it."
We see Nick's wardrobe is just like Olivia's, everything is blacks and grays.
"What was written will come to pass." Written on the wall. Olivia has seen this before when David Robert Jones escaped the hospital.
Olivia is immune of Nick's abilities from having Cortexiphan in her body.
"You were made for this." Nick tells her when he begs her to kill him, to stop him from killing others.
If Peter Bishop Never Existed:
In this episode Peter is the force that keeps Olivia grounded. He is confident that she did not kill these people, that the first was a suicide and the second a murder that was committed by the wife as everyone witnessed, not by Olivia in her sleep.
Without Peter having calmed Olivia down by taking her hand, she may not have been able to continue under REM sleep and wouldn't have been able to find where Nick Lane lives.