There is a fine line between dreams and delusions.
A dream is a series of thoughts, images, and sensations occurring in a person's mind during sleep. It is a state of mind in which someone is or seems to be unaware of their immediate surroundings. Dreams also include cherished aspirations, ambitions, or ideals; a perception of something or some one as being wonderful or perfect.
But if a dream is an unrealistic or self-deluding it becomes a fantasy.
A delusion is an idiosyncratic belief or impression that is firmly maintained despite being contradicted by what is generally accepted as reality or rational argument, typically a symptom of mental disorder. Or it can mean the action of deluding someone or the state of being deluded, for example, what a capacity television has for delusion. Delusions of grandeur a false impression of one's own importance can cloud a person's judgement.
In LOST, the characters struggled along this fine line.
Jack had a dream to reconcile with his father. He could never meet his father's expectations. He felt that he was trapped in his father's shadow. He dreamed that his father would one day respect him as an equal. That seems to be a reasonable goal.
Kate had a vague dream about getting out of her boring, dull and suffocating rural Iowa life. However, her dream turned dark when she took the abuse her stepfather had on her mother to an extreme. She then went on a fantasy crime spree to hide from justice.
Locke had a simple dream. He wanted to be reunited with his parents; to be part of a normal family. But the bitterness of being abandoned by his parents and bouncing among foster families led him to be disillusioned about his fate. He tried to fantasize about having a new life, with a wonderful spouse to being an adventurous outback hero. His outlook crippled him, literally and physically, when he was scammed by his con artist father.
Ben's dream was from his lack of self-esteem and friends. He was blamed for mother's death. His alcoholic father never cared for him. He took his sorry lot of life for a long time until the island gave him an opportunity to feed a delusion of revenge and power. For Ben to be important and in control of his path, he believed that he had to be in charge, be the leader, to have control over others. He seized on the notions of absolute power against the conventions of normal human relations. He turned into a cold blooded killer and an absolute dictator.
Sayid had a common dream. He wanted to leave his war-torn homeland to live in peace with his true love, Nadia. His focus was to find her. In the end, we are unclear whether Sayid's affection for Nadia was real or imagined to cover up the pain of the tortures he made on others.
Hurley had a dream to re-unite with his father. To pick up where they left off when he was a child. But that only happened after he won the lottery. His father came back not to love him, but for the love of his new found money. The dream of a happy, healthy and wealthy family turned into a personal curse that led Hurley into mental institutions.
Sawyer had a mean dream. He vowed to kill the con-man who destroyed his family. His obsession with his revenge turned him into the man he hated - - - a con artist preying on the weakest. He began deluding other people by tapping into their fantasies of romance, wealth or fame. The fact that he was no better than the man who killed his parents made Sawyer believe that he was a worthless human being - - - in need of no compassion, friends, family or goals. Once he killed Cooper, his dream was gone and effectively, the focal point of his life was gone.
If you look to the island as the experimental extrapolation of each characters' dreams or desires, then many of them crossed the fine line. Jack's grief of losing his father before he could reconcile with him led him to madness (but not after showing the world he could be a good leader in a time of crisis.) But Jack's reconciliation only happened in a dream like state of the after life (or a projected version of it).
Kate's island dream was fulfilled because she never really had to account for all the crimes she committed in her real life. Were all those crimes merely unfulfilled fantasies of a young farm girl?
Locke had the opportunity to become the great outback hero, but his own personality flaws crashed and burned his own fantasy leading to his own projected tragic death at the hands of Ben.
Sayid's dream finish was confusing - - - as he re-connected with his long lost love, but then ended up with the exact opposite, Shannon, a spoiled rich girl with no talent and no ambition.
Hurley's island life contained more friends and finding Libby who would love him just as he was - - - but since Libby was seen as a pre-island mental patient in Hurley's day room, was Hurley's happy island ending just another delusion?
Sawyer's island life was only a means to an end. The end of his search for Cooper. And his fantasy revenge was fulfilled when Cooper was miraculously dropped in his lap. Once that occurred, Sawyer was merely a loner only looking out for himself. When he left the island, he had no prospects, no dreams, no aspirations. In one aspect, his life (purpose) died on the island.
Whether the island was a fantasy fulfillment zone is a question that viewers will continue to debate and theorize about. But it was clear that the island was the intersection of character dreams and delusions.