It might be fun to argue he was dreaming. Then everything we watched *could* have been some portion of the dream. Which means we could pick apart what all of the other characters represent and craft a lovely meta-story to the story. I can't be the only one who enjoys doing stuff like that for the sake of doing it? But no, I don't think he was dreaming.
@John
As long as no one else has the proper feel for the totem, then it's good. His wife is dead, so no one else knows how to recreate it within a dream, which allows him to use it to discern reality.