Way back in high school i had a similar idea, well or maybe not, it's hard to tell from the information.
Anyway: Sounds awesome. Right up my alley.
Some Ideas you might find helpful:
Godlike Powers are reversibly relative to the size of the world. Any conflicted one can control a world where only he lives, but it takes huge powers, or long work, to exercise them in a bustling city, that power has to be taken from all the other residents. So if a group of conflicted ones come in a small world which has only one inhabitant, he could have nearly godlike powers, if he is conflicted. Newcomers have to “rip” power from the original inhabitant to battle him.
The “Edge of the World” is a mist, through which sometimes other worlds can be seen, as foggy shadows. The fog lifts or goes at least less thick if two world connect.
Memories (of everyone or the conflicted ones) are also shattered. They can only remember some things or nothing of their past at all. Conflicted Ones can shape new memories with their powers, search the shatters for their original memories or even rip memories from others. (This could be three different kinds of learning new abilities, if any kind of rule system is used).
I'm sure I can come up with some more Ideas...
Quite a torture device. Though I like it, I have to play devil's advocate and ask: why all the scary dreams? If you've already got someone caught in a metal box with multiple sets of claws, why bother with the added torture of nightmares?
I guess what I'm saying is, I like the concept, but I'd like to see a little more with the background.
An interesting idea and a vicious torture device. When you truly want your enemy to suffer.
A conceivable variation might be to allow an outsider to share in the vision in order to gather intelligence. How better to get to know your enemy than to see how he reacts in a sandbox?