I could survive on a five hour sleep cycle, but not much less. I did it five nights a week when I was in college, working full time and then doing a rotation.
The human body, way back in the 'Age Before Lights", had to adjust , because, though they were the hunters during the day, they were the prey in the dark.
It is a pr oven fact, that we have a 'clock' set in our systems. We are at our best early in the morning, think clearest in the early afternoon, and start to wind down in the evening. Our bodies are made to rest and sleep at night.
The dream state you suggested, I experience only at night. During naps, I prefer to call them power naps or cat naps, I do not dream. I don't think it is for the lack of REM sleep. Yes the body does go through cycles of sleep, and yes, it is in stages. In each cycle, one goes through "Light sleep" when one is semi-awake, you still hear the door bell, if someone calls your name you will respond. The next part of the cycle, is actual sleep, where you toss and turn. Then the deepest, or REM sleep, where you dream.
As the hours pass the cycles get longer. So the whole cycle when you first go to bed and sleep may be 45 minutes, to one hour. Then the next, each stage of the cycle is a little longer. Repeating until the longest is last cycle.
You could live on a shorter sleeping schedule but your body would have to adjust. And your health may suffer.
Apnea Sleep study done on my children. Why they needed them, as explained by our doctor.