Micolash, Host of the Nightmare, was most likely a former student of Byrgenwerth, until he went insane after contacting the Great Ones by using the Mensis Cage. He implies that he is aware of the Dream World.

A popular theory about the Nightmare of Mensis, and Micolash in particular, is that all beings found in the Nightmare are people that attempted to make contact with the Great Ones. The Mensis Cage placed on one's head traps the thoughts of its bearer, and upon their death, are immersed into the dream as themselves or other freakish incarnations.

This might explain Micolash's death quote "Now, I'm waking up, I'll forget everything." as his consciousness exists only in the Nightmare, and that upon being freed he will awake to find only his own corpse.