Hi Lalow,
I used to have a fairy altar as an experiment, while I was an atheist. Now that I pray to my Ishta and meditate, the fey are drawn to me much more. They are usually in the form of insects, which can be mischievous, but I don't treat them differently from any other soul.
One appeared as my totem, a frog, which symbolizes transformation, and actually landed on my crown chakra recently. I had held thousands of frogs in my cruel hands during my youth, but it seems someone has forgiven me.
Perhaps the transformation is just forgiving the self. I feel I must do that in order to love, or maybe that forgiveness is just a different modality of the same thing, ie, spirit. I don't purport to know the outcome.
Your dream sounds interesting. Thanks for sharing it. In what context is it occuring?