I heard a similar story about Dorothy Parker -- that she dreamed that she had written the most profound, lyrical, meaningful poem in history. She grabbed a pencil and paper to write it down, and in the morning looked at what she had written:

Higamus Hogamus
Women are monogamous
Hogamus Higamous
Men are polygamous

-----

OTOH, we have "Kubla Khan", which Coleridge claims to have written in something very like a dream state; and I have stories that I would swear on a stack of Bibles are simply transcriptions of dreams. (I don't clam that these are the greatest stories EVAH, but they are certainly a step above Parker's doggerel)

I've mentioned elsewhere that I know perfectly well that dreams don't work that way; but the -- what should I call it? Fugue state? -- between dreaming and waking is a psychological tarpit -- any thoughts, feelings, convictions that enter your brain at that point become stuck for life, more real than reality.

 

With Coleridge, I think it's possible he was experiencing some kind of manic state. I don't know if anyone else has theorised this, and it's a bit of a mug's game to diagnose dead writers, but 'Dejection: an ode' is a very precise description of a depressive state, and there's Carlyle's description of visiting him:

Nothing could be more copious than his talk; and furthermore it was always, virtually or literally, of the nature of a monologue; suffering no interruption, however reverent; hastily putting aside all foreign additions, annotations, or the most ingenious desires for elucidation, as well-meant superfluities which would never do. Besides, it was talk not flowing anywhither like a river, but spreading everywhither in inextricable currents and regurgitations like a lake or sea; terribly deficient in definite goal or aim, nay often in logical intelligibility; *what* you were to believe in or do, on any earthly or heavenly thing, obstinately refusing to appear from it. So that, at most times, you felt logically lost; swamping near to drowning in this tide of ingenious vocables, spreading out boundless as if to submerge the world.To sit as a passive bucket and be pumped into, whether you consent or not, can in the long-run be exhilarating to no creature; how eloquent soever the flood of utterance that is descending. But if it be withal an confused unintelligible flood of utterance, threatening to submerge all known landmarks of thought, and drown the world and you! - I have heard Coleridge talk, with eager musical energy, two stricken hours, his face radiant and moist, and communicate no meaning whatsoever to any individual of his hearers...

- all of which sounds not unlike an extreme manifestation of the kind of energy I've seen in people with mania. So there's a case to be made that Coleridge had some element of bipolar to his genius, which could complicate any assumption of dream or waking...
 

Mind you, I"ve always preferred the Ancient Mariner; any Kubla Khan fans may have a better perspective than me. :-) Any big enthusiasts out there want to step up and make the case?
 

I've heard almost that exact same story told about a man who always knew the secret of the universe when he was under laughing-gas, but forgot it when he wasn't. When he finally, with a great effort, managed to write it down and look at it later, it was "a smell of petroleum prevails throughout". Can't remember where I read that, though.
 

Well, I love Kubla Khan (particularly with Nick Bantock's pop-up illustrations -- go ahead, call me shallow), but I certainly agree that Coleridge presents as a severe manic depressive.

I guess what strikes me as dream-like is the repeated plosive bursts of vivid, almost random archetypal imagery (thrusting "girdled towers" plowing the fertile earth, forceful fountains, flinging rivers, counterpoised with dark caverns, panting chasms, sinking oceans) all knit together with the barest narrative thread of the wailing lover, the throbbing dulcimer, and the omnipresent murmurings of drone of labial alliteration...

Oh dear, I think I've had that dream. Excuse me while I go to fan myself...
 

Lawrence Block tells another version in "From Plot to Print" to caution aspiring writers against looking for inspiration in a joint. A habitual cannabis user has an epiphany while under the influence, scribbles it down, and discovers the following morning that it says, "This room smells funny."